Preamble

The House met at Half past Two o'Clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

CITY OF LONDON (GUILD CHURCHES) BILL

To be read the Third time upon Tuesday, 10th June.

BRIGHTON CORPORATION (TROLLEY VEHICLES) PROVISIONAL ORDER BILL

DERBY CORPORATION (TROLLEY VEHICLES) PROVISIONAL ORDER BILL

PORTSMOUTH CORPORATION (TROLLEY VEHICLES) PROVISIONAL ORDER BILL

PIER AND HARBOUR PROVISIONAL ORDER (BRIGHTON) BILL

PIER AND HARBOUR PROVISIONAL ORDER (GREAT YARMOUTH) BILL

PIER AND HARBOUR PROVISIONAL ORDER (HERNE BAY) BILL

PIER AND HARBOUR PROVISIONAL ORDER (KING'S LYNN) BILL

PIER AND HARBOUR PROVISIONAL ORDER (MINEHEAD) BILL

PIER AND HARBOUR PROVISIONAL ORDER (SEAHAM HARBOUR) BILL

Read a Second time, and committed.

PETITIONS

Health Service Charges

Dr. Stross: I beg leave to present to this honourable House a national Petition signed by 211,577 of Her Majesty's subjects. The grievance set forth in this Petition is that charges are to be levied on prescriptions, on dental treatment, and on surgical appliances in the National Health Service. The Petitioners do declare their anxiety, for they believe that this is a backward step which will penalise the lower income groups and bear harshly on very many families when the breadwinners cannot support them. It is also their belief that the charges may prevent

early treatment of and rapid recovery from disease. They look to this honourable House to alleviate their distress, being conscious, in particular, of the plight of those who are aged or suffer from chronic sickness and who must be nursed at home. The Petition concludes:
Wherefore your Petitioners pray that these charges be withdrawn and measures taken to improve the existing Health Service so essential to the wellbeing of the community.
And your Petitioners, as in duty bound, will ever humbly pray.

Sir H. Williams: On a point of order. Before this Petition is presented, may I draw your attention, Mr. Speaker, to the fact that the document on which it is written seems to me a most disorderly document because, in addition to the Prayer, there is an appeal for subscriptions to a private organisation, namely, the Socialist Medical Association. Printed along the side is a space for donations. I do not know whether they will accompany the Petition.
I do not believe that this has ever happened before. It seems to me most improper to get up a Petition to Parliament and use the Petition form as a device for raising money for a private organisation. Because it is so unusual, I do not know whether to raise the matter as a point of order, or as one of Privilege, but it seems to me a complete abuse of the system of petitioning this honourable House.

Dr. Stross: Further to that point of order. May I assure you, Mr. Speaker, and all hon. Members of this House that this matter was most carefully declared upstairs in the Petitions Office, whose advice was taken? The opinions expressed by the hon. Member for Croydon, East (Sir H. Williams), are unfounded, for previous Petitions have been made exactly in this way as this. With that explanation, may I now present the Petition?

Mr. Speaker: In answer to the point of order that has been raised, I am bound to say that I know of no precedent which would entitle me to rule the Petition out of order on what has been disclosed. There is a general rule that any matters that are extraneous to the subject matter of a Petition are undesirable and should be avoided in the Petition. If the Petition is presented and appears before the Select Committee on Petitions, I


will draw the Committee's attention to what has been said, and if the Committee sees fit to report back to this House later we could, I think, discuss the matter then.

Mr. Braine: Further to that point of order. Would it not appear to be a grossly improper thing that an appeal for subscriptions should be issued under the guise of a Petition to this honourable House? May I inquire whether the Committee to which the Petition will be referred has any powers to deal with the matter on a disciplinary basis?

Mr. Speaker: There is no question of a disciplinary basis. I have already ruled on the general issue. The Committee has power to make a recommendation to the House on the matter.
To lie upon the Table.

Northern Roadways, Ltd. (Birmingham-Glasgow Services)

Mr. Shurmer: I beg leave to present to this honourable House a humble Petition signed by 16,250 citizens of Birmingham and district who consider that the coach services of Northern Roadways, Ltd., have been fulfilling a long-felt need and that the decision recently taken by the Minister of Transport to ban these services between Birmingham and Glasgow is unfair to the public and to the company as well: The Petition concludes:
Wherefore your Petitioners pray that steps may be taken with all expediency to allow the services to operate.
And your Petitioners, as in duty bound, will ever pray.
To lie upon the Table.

Oral Answers to Questions — WEST INDIES

Cayman Islands (Afforestation)

Mr. Braine: asked the Secretary of State for the Colonies what steps have been taken to implement the report of the Conservator of Forests, Jamaica, with regard to the forest resources of the Cayman Islands in December, 1945.

The Minister of State for Colonial Affairs (Mr. Henry Hopkinson): Good progress has been made in the thatch rope, and boat-building industries. Exports of ropes doubled in value between 1945 and 1950. The Conservator of Forests' Reports also recommended the carrying out of a cadastral survey but the cost of this (estimated at £23,000) is far beyond what the Dependency can afford.

Eleuthera Island (Development Scheme)

Mr. Braine: asked the Secretary of State for the Colonies whether he is aware that the Colonial Development Corporation Scheme on Eleuthera Island is operating at a heavy loss; and whether, in view of the serious consequences to the small local community if it should fail, he will examine alternative methods, not under the operation of the Colonial Development Corporation, by which the Scheme may be placed upon a sound basis and by which production can be maintained.

Mr. Hopkinson: I am aware from the Annual Report for 1951 that the Corporation's operating losses on this Scheme were£49,960. I understand that alternative methods for developing the Eleuthera Estate are now being studied by the Corporation.

Mr. Braine: Is my right hon. Friend aware that this is only one of the many cases in which the Colonial Development Corporation have been shown to be not the best instrument for large-scale development? Is it the intention of my right hon. Friend to make an early statement of policy on the matter?

Mr. Hopkinson: There will no doubt be at some future date an opportunity of discussing all these matters on the Colonial Development Corporation's Report.

Mr. Braine: Can my right hon. Friend say when that is likely to be debated?

Mr. Hopkinson: That is a matter which must be left to my right hon. Friend.

Mr. J. Griffiths: Is it not clear from our experience of development in the Colonies by both private and public enterprise that we ought not to cherish the hope that we shall always be able to make these developments at a profit?

Mr. Braine: Would not my right hon. Friend say that development by external agencies is hardly in keeping with our colonial policy in general? Would it not be far better to invest public money in the Colonial Development and Welfare Fund and let the responsibility be vested in Colonial Governments?

Mr. Griffiths: Is it not the case that the policy of the late Government, which this Government is continuing, was to use both the Colonial Development and Welfare Fund and the Colonial Development Corporation?

Mr. Hopkinson: It is certainly our intention to draw on both.

Inter-Island Communications

Mr. Powell: asked the Secretary of State for the Colonies if he will undertake that surface communications between the islands of the British West Indies shall be maintained at least at their present level.

Mr. Hopkinson: No, Sir. My right hon. Friend is not in a position to give an undertaking in the terms suggested. He is, however, examining urgently, in consultation with the Minister of Transport and the local Governments, the whole question of shipping services between the West Indian Colonies.

Mr. Powell: May I take it from that reply that my right hon. Friend is aware of the danger that the so-called "Lady Boat Service" between the islands may be withdrawn and that he views that possibility with anxiety?

Mr. Hopkinson: I am sorry to say that these two boats are going to be withdrawn, probably as from 1st October, and are not going to be replaced.

Lieut,-Colonel Lipton: Will the Minister of State bear in mind that there is no likelihood of the present surface com-

munications between the West Indian islands sinking below their present level so long as Plimsoll line regulations are observed?

Mr. Gower: Will the Minister bear in mind that the cost of air communication is somewhat prohibitive to many of the people out there.

Mr. Hopkinson: We are well aware of the necessity to maintain communications between the islands, and we are considering what means there are of improving them.

Oral Answers to Questions — GOLD COAST (TEMA HARBOUR SCHEME)

Sir R. Acland: asked the Secretary for State for the Colonies whether he will make a statement on the present position in relation to the proposal to build a second harbour for the Gold Coast at Tema; and, in particular, whether any work has actually begun on or near the site in preparation for the harbour, or when it is expected that such work will begin.

Mr. Hopkinson: The proposal of the Gold Coast Government to build a second port for the Gold Coast at Tema has recently been approved by the Legislative Assembly. Surveys of road and railway connections with Tema are almost completed, and it is hoped that construction of these will be started in the near future.
The planning of a proposed township at Tema is also in hand. The Gold Coast Government is declaring a planning area and taking preliminary steps towards the acquisition of the necessary land.
Detailed plans for the construction of the harbour itself are still under examination and, although no constructional work has yet started, plans are far advanced for the preliminary work which must precede the actual construction.

Sir R. Acland: Will the right hon. Gentleman make sure that everything which can be done through the Colonial Office is done to see that all concerned are seized of the urgent necessity of getting the work completed at the earliest possible date?

Mr. Hopkinson: Yes, Sir.

Oral Answers to Questions — KENYA

Legislative Council (African Representatives)

Mr. Fenner Brockway: asked the Secretary of State for the Colonies whether, in view of the resolution of the Kenya African Union protesting against the retention of the nomination system for African representatives in the Kenya Legislative Council and the decision of members of the Union not to accept nomination, he will reconsider his decision not to instruct the Kenya Government to introduce an electoral system for African representation.

Mr. Hopkinson: No, Sir. My right hon. Friend does not propose to alter the arrangements for the appointment of the Legislative Council in 1952. Although in form the African members of the Legislative Council are nominated there is a considerable measure of popular choice in their selection.

Mr. Brockway: Will the right hon. Gentleman reconsider the decision as the population of 30,000 Europeans has 14 elected members on the Legislative Council in addition to 25 ex officio members, while the population of five million Africans has no elected representative at all? As the Legislative Council is to appoint a committee to prepare future constitutional arrangements, is it not desirable that there should be Africans upon it?

Mr. Hopkinson: The former Colonial Secretary, in a statement which he circulated in the OFFICIAL REPORT in May last, reported that he had discussed the future constitutional development of Kenya with those concerned and proposed that within 12 months of the beginning of the life of the next Legislative Council—that is to say, within 12 months of the end of May this year—a body should be set up to consider what constitutional changes should be made, and he said that there would be no major constitutional changes in 1952. That is the position which my right hon. Friend has accepted and carried on. In any case, as the Council is to meet in the course of the next few days, it would be quite impracticable to make any arrangements for any other system of nomination.

Mr. Hale: Can the right hon. Gentleman say that there will be no change of

policy in this matter, at any rate in the way of going back on the undertaking given by my right hon. Friend?

Mr. Hopkinson: Yes, Sir.

Mbaris (Land Compensation)

Mr. Fenner Brockway: asked the Secretary of State for the Colonies, in view of the protest signed on behalf of the Agikuyu Mbaris, a copy of which has been sent to him, against the proposal to compensate them for land lost owing to the building of roads and railways by settling them on forest lands which the Mbaris claim is already their traditional property, he will urge upon the Kenya Government that compensation satisfactory to the Mbaris should be given.

Mr. Hopkinson: I have asked the Governor of Kenya for a report on this matter and will write to the hon. Member when I receive it.

Mr. Brockway: In view of the intense feeling in Kenya about land matters, will the right hon. Gentleman seek to meet the demands which have been made in this case? They form not an objection to building but a request that compensation should be given for land lost on the side of the new roadway?

Mr. Hopkinson: The only information that we have on the subject is that received from the hon. Member and it is not enough to enable my right hon. Friend to say whether he is prepared to intervene. As I have said, we have asked the Governor for a report.

Mr. Stokes: Would not all the difficulty be overcome if a thorough—going method of taxation of land values was introduced?

Scholarships

Mr. Harold Davies: asked the Secretary of State for the Colonies (1) how many scholarships for overseas study were granted by the Kenya Government in 1951 for Europeans, Asians and Africans, respectively; and what was the amount expended for this purpose on each of the groups mentioned;
(2) how many scholarships have been granted to Africans in Kenya in the last three years by individuals or private bodies amongst Asians or Europeans.

Mr. Hopkinson: The information which the hon. Member desires is not available here, but I have asked the Governor of Kenya for details. I will write to the hon. Member as soon as have his reply.

Mr. Davies: While thanking the right hon. Gentleman for that reply, may I ask him whether he is aware that there is terrific discrimination against the Africans in regard to educational opportunities? Furthermore, is he aware that the European community use as an excuse the lack of knowledge of the Africans for opposing ultimate self-government, and that no conspicuous action has been taken by the Kenya authorities or this Government to help those people to get their education and ultimately to work for self-government?

Mr. J. Griffiths: Before the right hon. Gentleman replies, may I ask him whether it is not a fact that in recent years, since 1945, a university college has been built in East Africa and almost exclusively used for Africans, and that an increasing number of Africans are being trained there?

Mr. Hopkinson: I thank the right hon. Gentleman. I must say that, from all my knowledge of the matter, the Government in Kenya are most attentive to the needs of the Africans in educational matters.

Mr. Davies: Is it not the case that only seven scholarships have been given?

U.N. Bursaries

Mr. Rankin: asked the Secretary of State for the Colonies what restrictions exist on applications for United Nations Organisation bursaries by African residents of Kenya or other non-self-governing territories.

Mr. Hopkinson: None, Sir. On the contrary, in selecting candidates from Dependent Territories for fellowships and scholarships the United Nations give priority to indigenous candidates. Applicants must, of course, be able to fulfil the general conditions prescribed by the technical assistance administration of the United Nations.

Mr. Rankin: Is the right hon. Gentleman not aware that the Kenya Government find it difficult, they say, to introduce compulsory education for Africans

and to provide sufficient African teachers for the purpose, on the ground of lack of finance? Is this not a method whereby the Kenya Government might ease some of their burdens, and will the right hon. Gentleman encourage that Government to make a wider use of bursaries than they are evidently doing?

Mr. Hopkinson: This particular matter, as the hon. Gentleman realises. concerns only persons already in Government service, or whom the Government would employ after the tenure of their scholarships. On the last occasion, the Government of Kenya informed us, in June, 1951, that they had no suitable indigenous candidates for nomination. I would point out that it is not only a question of finance from the United Nations, and that the Kenya Government are required to help with the financing of such matters as travelling expenses and outfitting, and in a number of other ways. This is solely confined to persons in the Government service.

Mr. Baldwin: Is my right hon. Friend aware that if the students who come over here would take up a course of teaching instead of wanting to become lawyers, it would be better for their own people when they got back.

Passports (References)

Mr. Rankin: asked the Secretary of State for the Colonies to what extent references are accepted from Africans on behalf of applicants for passports in Kenya.

Mr. Hopkinson: Applicants for passports in Kenya must be vouched for by a British subject of professional or similar standing. Recommendations by Africans who fulfil this requirement are accepted by the Passport Office in Kenya.

Native Land (Leases)

Sir L. Plummer: asked the Secretary of State for the Colonies how much land in the native leasehold areas of Kenya, as defined in the Sixth Schedule of the Crown Lands Ordinance, has been leased to Europeans since 1938.

Mr. Hopkinson: None, Sir.

Sir L. Plummer: asked the Secretary of State for the Colonies in how many cases the Governor of Kenya has sanctioned the transfer of a lease from


an African to a non—African in the native leasehold areas since 1938; and what is the total area of land so transferred.

Mr. Hopkinson: No such transfers have taken place.

Native Reserves (Boundaries)

Sir L. Plummer: asked the Secretary of State for the Colonies what alterations in the boundaries of the native reserves of Kenya and the temporary native reserves have been made by the Governor of Kenya since 1938 in the exercise of the power conferred on him by Section 54 of the Crown Lands Ordinance; and what is the total area of land affected.

Mr. Hopkinson: Only one such alteration has been made since 1938. The Kamasia tribe gave up 13,250 acres in a native reserve and received in exchange 14,743 acres of Crown Land in the highlands which the Government purchased for the purpose. This alteration, by which the reserve gained 1,493 acres and an improvement in the boundaries, was approved by, among other bodies, the Native Lands Trust Board, and confirmed by a resolution of the Legislative Council.

Sir L. Plummer: Am I to assume from that answer that the Government will continue the course followed by the previous Government and will see to it that land alienated from the Africans will not be transferred to the Europeans?

Mr. Hopkinson: In general, there has been no alteration of policy whatever in this matter.

Sir H. Williams: Which of these acres had most groundnuts on them?

Mr. Hale: Is the Parliamentary Secretary aware that while his answers may be technically accurate and his friends are laughing behind him, there is attested evidence that at the time the allocation of Crown Lands was made a lot of native holdings were overlooked by accident, and that there were cases in Kenya in the last 12 months of tribes being evicted from land which they and their ancestors had occupied for hundreds of years, and where their ancestors are buried?

Mr. Rankin: Is the right hon. Gentleman giving us a firm assurance that the

system which prevailed, and which I am assured is still in existence, whereby Members of the Government in Kenya can award land to themselves by decisions which they take in council, is now terminated finally?

Mr. Hopkinson: That is another question.

Health Services

Mr. J. Johnson: asked the Secretary of State for the Colonies what hospitals and other health facilities financed by the Kenya Government are open to all races.

Mr. Hopkinson: All hospitals and health facilities entirely financed by the Government of Kenya are open to all races, with two exceptions. The exceptions are the European hospitals at Nairobi and Kisumu where there are separate hospital facilities for other races.

African Trade Unions

Mr. Hale: asked the Secretary of State for the Colonies the total membership of trade unions in Kenya having an exclusive or predominant membership of African workers, with figures of their total membership for the years 1948, 1949, 1950 and 1951.

Mr. Hopkinson: For unions known not to be exclusively Asian or European, Kenya Labour Department reports show membership figures of approximately 5,900, 1,500 and 3,600 for 1949, 1950 and 1951, respectively. These can only be regarded as estimates and in 1948 the Kenya Government was unable to give any firm figure for regular membership.

Mr. Hale: Is the hon. Gentleman aware that the United Nations Report on Non-Self Governing Territories makes it clear that in their view there were 10 such unions in 1948 and only eight in 1949, and that the estimated figure of membership they give indicates a further diminution in 1950? Will he therefore call for a full report on this matter so that I can put a Question down later when he has the information?

Mr. Hopkinson: I have given the hon. Member all the information I have, I am quite willing to ask the Governor of Kenya for further information, but I have answered the Question.

Mr. Hale: Does not the hon. Gentleman realise that if there has been a progressive diminution of trade unions in Kenya it is time for him to ask for the reasons?

Mr. Hopkinson: There is a perfectly good explanation for the recent average fall in 1950. It is that there is one union which previously had 2,500 members for which the Kenya Government felt unable to give any figures last year.

Technical College, Nairobi

Mr. J. Johnson: asked the Secretary of State for the Colonies what progress is being made with the new technical college for Nairobi.

Mr. Hopkinson: The Governor of Kenya laid the foundation stone last month.

Mr. Johnson: Is the Minister aware that to date there is no further technical education in the whole of East and Central Africa, which has a population of about 20 million Africans? Can I have an assurance that he will keep a jealous and vigilant eye upon the future development of this ewe lamb of ours in East Africa?

Mr. Hopkinson: Certainly.

Mr. Alport: Is my hon. Friend aware that while there are other facilities for technical education, at least in Central Africa, it is most important that progress in this important project should be made as quickly as possible?

Mr. Hopkinson: Yes.

Technical and Commercial Education

Mr. J. Johnson: asked the Secretary of State for the Colonies how many secondary technical and secondary commercial schools there are in Kenya.

Mr. Hopkinson: I am asking the Governor of Kenya for this information and will write to the hon. Member when it is received.

Mr. Johnson: Is the Minister aware that I think that is a disappointing answer? It is very important that we feed the technical college of the future with many school leavers from our technical and commercial schools in this part of Africa.

Mr. Hopkinson: There are probably no exact counterparts in Kenya of the secondary technical and commercial colleges in this country, but there are schools which may be regarded as their equivalent. I will consult the Government of Kenya and let him know.

Sir R. Acland: But the Minister will not dispute that the figures are much lower than those which apply to the Gold Coast where Africans have taken a larger share in public life?

Collective Fine, Nyeri

Mr. Hale: asked the Secretary of State for the Colonies why a collective fine has been imposed upon the inhabitants of the Nyeri area in Kenya, for failure to give information to the police; and under what existing Act or ordinance such fine has been imposed.

Mr. Hopkinson: Under Section 2 of the Collective Punishment Ordinance, a collective fine was imposed on the inhabitants of the Nyeri District for suppressing evidence in the investigation of cases of arson which occurred in the district. The proceeds of the fine are being used to compensate those who have suffered losses as a result of this arson.

Mr. Hale: Would the hon. Gentleman please convey to the Government and Legislative Council of Kenya that a collective fine is contrary to principles of natural justice, contrary to the Declaration of Human rights, contrary to the undertakings we gave as governors of non-self-governing territories when we signed the Charter of the United Nations, and repugnant to the elementary conceptions of decency of this House?

Sir I. Fraser: Did not many of us on both sides of this House approve of the principle of a collective fine imposed upon the Japanese for the prisoners of war?

Mr. Hector Hughes: Is the Minister aware that this system of collective punishment punishes not only the guilty but the innocent, and therefore should be abolished forthwith?

Mr. Hopkinson: I would agree in general in regard to collective punishment, but in this case almost the entire population were involved. It was a revolting attempt, not only to destroy the homes of these people, but to burn


them in their own houses. These people were respectable members of the African community, including tribunal elders and the Christian schoolmaster of the Church of Scotland Mission. It was an attempt to murder them.
The police and the other authorities, including the chiefs, tried to get all the information they could out of the inhabitants and they were unable to get any answer at all. This fine, which is being used to compensate the people who lost their houses, seems to me in the circumstances to be quite fair.

Mr. Hale: Is the Minister then telling the House that there has been—[Interruption.]

Mr. Speaker: Order. It would assist progress if hon. Members would keep silent and allow the questions to be asked.

Mr. Hale: Is the right hon. Gentleman then telling the House that there has been no trial in this case, no finding of guilt, because no evidence was available, and that because the men could not be put on trial and there could be no finding of guilt, and because there was no evidence, the Government have resorted to this system of collective punishment?

Mr. Hopkinson: I am telling the House that acting under the existing Collective Punishment Ordinance, the Government of Kenya did exactly what they were supposed to do and that they carried out the law.

Native Lands Trust Ordinance

Sir R. Acland: asked the Secretary of State for the Colonies (1) the total amount of compensation which has been paid in Kenya, since 1938 under Sections 16 and 17 of the Native Lands Trust Ordinance;
(2) of the total area set apart or excluded from the native lands, native reserves and the temporary native reserves in Kenya, since 1938, how much was held under a recognisable system of private-right holding within the meaning of Section 17 (1) of the Native Lands Trust Ordinance.

Mr. Hopkinson: I am asking the Governor of Kenya for this information and will write to the hon. Member when it is received.

Oral Answers to Questions — TANGANYIKA

Wemuru (Land Evictions)

Mr. Fenner Brockway: asked the Secretary of State for the Colonies whether, in view of the fact that the Wemuru, in Tanganyika, petitioned to the Trusteeship Council of the United Nations in August, 1951, against the intention of the Tanganyika administration to evict them from their land, and that they were evicted in November, 1951, before the Trusteeship Council had had an opportunity to consider this petition, he will instruct that the tribe be reinstated with compensation for the losses they have suffered, pending a consideration of their petition by the next meeting of the Trusteeship Council.

Mr. Hopkinson: No, Sir.

Mr. Brockway: Is it not accepted practice that where the right of a petition to an authority is given, action shall not be taken before the authority has had an opportunity to consider the petition?

Mr. Hopkinson: The terms of the land settlement scheme in the Wemuru area were drawn up and publicly announced in June, 1949. After that, arrangements went forward for carrying out the scheme. It was not until two years later when the time came for the move to be made that the Wemuru concerned petitioned the Trusteeship Council.
As the right hon. Gentleman the Member for Llanelly (Mr. J. Griffiths) has said on many occasions, it is clear that the land which the Wemuru are to receive is better than the land which they are vacating. As far as the position of the Trusteeship Council is concerned, it is not the practice, and we could not agree, that Her Majesty's Government should undertake to accept their directions in regard to the day-to-day carrying out of policy.

Public Services (Native Appointments)

Mr. Hale: asked the Secretary of State for the Colonies whether he will report the extent to which Her Majesty's Government, as administering authority in Tanganyika, have succeeded in issuing to the inhabitants of Tanganyika a progressively increasing share in the administrative and other services of the territory, and giving figures of the number of personnel involved, in accordance with the


provisions of Article 6 of the Trusteeship Agreement for Tanganyika, Command Paper No. 7081.

Mr. Hopkinson: I assume that the hon. Member is referring to the indigenous inhabitants.
The distribution by races of posts in the public service is given in Appendix V to each Annual Report on the territory. The Report for 1950 is in the Library. The 1951 Report will be placed there when it is published, probably in July. The senior and more responsible posts are still filled by non-Africans, but one objective of the education development plan now being carried out is to raise the standard of African education and so enable Africans to qualify for appointments to these posts

Mr. Hale: Is the hon. Gentleman aware that, when this mandate had passed from the League of Nations to the United Nations, his Ministry entered into a solemn undertaking, in the form of the Command Paper to which the Question refers, to proceed progressively to give democratic representation and participation in administration to the indigenous population, and will he make it clear to the House that he intends to proceed with that as rapidly as possible?

Mr. Hopkinson: I think I made that clear on answer to the Question. As I have said, the plan of the Tanganyika Government for the development of African education is published in the Annual Report for 1950. Its main features are: increases in the target figure for pupils in primary and secondary schools, for the gradual replacement of district by middle schools, increased provision for girls' education and an increase in teacher training facilities.

Oral Answers to Questions — MALAYA AND SINGAPORE

Strikes

Mr. Awbery: asked the Secretary of State for the Colonies how many strikes have taken place in Singapore during the past two months; how many are now proceeding; what are the chief causes; and what is being done to create the necessary conciliation machinery to prevent them.

Mr. Hopkinson: Three, Sir. The one affecting postal employees continues but

has now been suspended for three days to permit further negotiations. To avoid a long statement I will write to the hon. Member about the causes. Normal machinery for conciliation and arbitration already exists. As regards negotiations with Government employees, there is another Question on the Order Paper.

Mr. Awbery: Is the Minister aware that the Governor of Singapore recently stated that he is aware of the delays that are taking place in the negotiations on the wage claim by employees, that half this claim was put in in 1950, and that it was two days before the notice to strike terminated that an offer was made by the Government?

Mr. Hopkinson: My hon. Friend is referring to the Post Office employees, and I shall be dealing with that in answer to the next Question.

Mr. Driberg: As the matter is of some general interest, would the right hon. Gentleman be good enough to circulate his reply in the OFFICIAL REPORT when he receives the information, instead of writing only to my hon. Friend?

Mr. Hopkinson: I will send the hon. Member a copy, too.

Mr. Driberg: The right hon. Gentleman has not caught my point. This is a matter of some general interest, and will he consider, when he gets the information, circulating it in the OFFICIAL REPORT instead of writing only to my hon. Friend.

Mr. Hopkinson: Certainly I will meet the convenience of the House in this matter, and I can circulate it in a written reply if that will be more convenient to the House.

Post Office Staff (Wage Claim)

Mr. Awbery: asked the Secretary of State for the Colonies how long the Post Office Uniformed Staff Union of Singapore were waiting for negotiations to commence over their wage claim before they decided to strike; and what steps he is taking to speed up such negotiations.

Mr. Hopkinson: A formal demand was first made last November and the


Government at once opened negotiations. After a postponement for good reasons accepted by both sides, these were resumed in March. Six out of 12 points had been settled by 12th May when the strike was called. The Singapore Government is aware of the need for speeding up negotiations on wage claims by its employees, and agreement has been reached with the unions concerned on the establishment of a joint negotiating council.

Mr. Awbery: Can the Minister tell us what steps are being taken to bring to a conclusion the strike which is in progress?

Mr. Hopkinson: All the information I have is that there has been a suspension for three days while the negotiations are going on.

Mr. Awbery: Is the Minister aware that it was on 14th May that this strike started, that it has been going on for a fortnight, and what has been done by the Government to meet the employees to bring about a settlement of this dispute?

Mr. Hopkinson: I will look into the matter and, if the hon. Member will be good enough to put down another Question, I will deal with it then.

Collective Punishments (Children)

Mr. Fernyhough: asked the Secretary of State for the Colonies if the recent curfew at present in operation in Southern Johore applied to children.

Mr. Edelman: asked the Secretary of State for the Colonies whether, when imposing collective punishments or when restricting rations in Malaya in order to deny resources to terrorists, he will ensure that such punishments or restrictions do not fall upon children.

Mr. Hopkinson: Curfew orders apply to children as well as adults. One reason is that the terrorists do not scruple to force children to fetch supplies or bear information. It is similarly not possible to exempt children from rationing restrictions, but care was taken to ensure that the supply of food was adequate to maintain health in places where these restrictions have had to be imposed.

Mr. Fernyhough: But does not the Minister realise that, whatever the sins of the fathers, there is something very un-Christian, immoral and totalitarian in punishing the children for that, and will he not take steps to see that this policy is stopped? Does he not realise that this is building up a fund of hatred in Malaya which will eventually cause us to leave that country whether we like it or not?

Mr. Hopkinson: I would not accept the assumption in the first part of the hon. Gentleman's question. I quite realise the hardship that has been caused to the children in this connection, but efforts are being made to arrange for them to go to school under escort if necessary. During curfew time patrols are out after dark and are compelled to fire if there is no reply to their challenge. There is considerable danger to children in allowing them out in those circumstances.

Mr. Edelman: Is not the right hon. Gentleman aware that the indiscriminate restrictions which hurt children cannot but stiffen the morale of the enemy, and that it is inexpedient and immoral to apply punishments and restrictions which harm children who cannot be of any possible assistance whatsoever to the terrorists?

Mr. Hopkinson: That is not the opinion of the authorities on the spot. Their information is that there have been many cases in which children under 12 have been used for carrying messages and taking supplies—

Mr. Manuel: How many cases?

Mr. Hopkinson: —to the terrorists.

Mr. Remnant: Would my right hon. Friend give an assurance that the safety of our own troops and people is paramount and that all steps necessary to that end will continue to be taken?

Mr. Hopkinson: Of course, that forms an important factor in this matter. In this particular area where the regulations had to be enforced, we know that 12 people, including two of our own British officers, lost their lives and the rest of the party included harmless Malayan and Chinese workers who were employed on repairing the water supply of the town in question. All these things have to be taken into consideration.

Mr. Edelman: While everyone is in favour of all possible means being taken in order to protect our troops and those engaged in Malaya in the security service and the civilians as well, is not the purpose of this Question to safeguard innocent children from indiscriminate punishment, and will the right hon. Gentleman assure the House that some such measures are being taken to safeguard the children?

Tanjong Malin Arrests

Mr. Driberg: asked the Secretary of State for the Colonies how many arrests were made on the basis of information received in response to the questionnaire distributed to the people of Tanjong Malin; and how many of those arrested are still detained.

Mr. Hopkinson: Thirty-two people were arrested. Three are still detained.

Mr. Driberg: Does not that very small result of this considerable operation show that it was futile as well as barbarous?

Mr. Hopkinson: It would be quite wrong to assume that the only purpose of this particular operation was to obtain answers to these questionnaires. As my right hon. Friend made perfectly clear, among the other objects a very important one was to reduce the rice supplies available to the terrorists and generally to discourage communication between the town and the terrorists.

Plantation Workers (Wages)

Mr. Edelman: asked the Secretary of State for the Colonies what discussions he has had with the Rubber Growers' Association in connection with proposals made in the Federation of Malaya to reduce the wages of plantation workers.

Mr. Hopkinson: None, Sir. This is a a matter for local negotiation between employers and workers' organisations. The existing agreement in the industry provides for fresh wage negotiations if the average price of rubber over the past quarter falls below one Malayan dollar per lb.

Mr. Edelman: Should not the right hon. Gentleman interest himself in the proposal to reduce wages for 300,000 workers in Malaya, who received only negligible increases during the periods of boom profits and prices? Should he not take some interest in the matter, in view

of the dangerous political consequences which are likely to flow and to affect still further the wages of these workers?

Colonel Harrison: Has the attention of my right hon. Friend been called to a statement in a newspaper that rubber workers in Malaya have been told that their wages are going to be cut?

Mr. Hopkinson: It is, of course, completely untrue.

Mr. J. Griffiths: Are the Government giving attention to the very serious consequences that will ensue in Malaya in existing circumstances, if the price of rubber continues to fall and small planters go out of existence as planters, because the economic life of the country will be disintegrated? Are urgent representations being made by him and his right hon. Friend to the Government of Malaya to take early steps to prevent that serious situation arising?

Mr. Hopkinson: We are very concerned over the whole question of the fall in the price of rubber, and we are going into the matter with very great care.

Police (Marriage Allowances)

Mr. Marlowe: asked the Secretary of State for the Colonies how much of the pay of Lieut. Birnie, of the Malay Police, is marriage increment; by how much such increment exceeds the 25s. a week which he allots to his wife; how much could she receive by way of marriage allowance if the necessary formalities were completed by the officer; and what are the formalities involved.

Mr. Hopkinson: Police Lieut. Birnie receives a total married increment of £175 a year. This includes £126 a year marriage allowance and £49 a year additional cost of living allowance. Any variation in the amount now being paid by Lieut. Birnie to his wife is a matter for agreement between the persons concerned or for the courts. There are no formalities involving the Federal Government.

Mr. Marlowe: Is the Minister aware that in this case and similar cases the Colonial Office are condoning a system by which some of these officers are putting into their own pockets money intended for the support of their wives? Is it not quite scandalous that the Colonial Office


should be a party to this kind of proceeding, and will he take steps to put pressure on officers who are behaving like this and see that they are interviewed by their commanding officers and are reminded of their obligations to their wives?

Mr. Hopkinson: I think this system, under which marriage allowances are made to the officer concerned and are under his control, exists in all the Services, both civil and military, in this country. So far as the second part of the question is concerned, the High Commissioner has expressed the view that it would not be proper for the Government to put any pressure upon Lieut. Birnie to increase his allotment. From my own examination of the case, it is quite clear to me that there is no possibility of successful pressure being privately brought to bear upon Lieut. Birnie. The matter has been put to him, without success, and it is quite clear that relations between this couple are so bad that there is no hope of persuading them to meet one another's wishes in any way.

Mr. Marlowe: What my right hon. Friend says about what happens in other services is perfectly true, but what also happens is that the commanding officer takes action with the officers concerned to ensure that they fulfil their obligations. Why is not the same thing done in the Colonial Office?

Mr. Hopkinson: We have no constitutional powers, nor has the commanding officer.

Mr. Marlowe: asked the Secretary of State for the Colonies whether he will identify and provide a copy of the regulation which precludes payment of marriage allowance to the wife of a police officer of the Malay Police unless the officer gives written consent to payment of such allowance.

Mr. Hopkinson: Marriage allowance is an emolument of the officer which the Government has contracted to pay to him. It is not payable to any other person, nor is its payment subject to any other condition than that the officer is married and legally liable for the maintenance or part maintenance of his wife or a child. Colonial Regulation No. 48 provides that an officer may remit a portion of his emoluments monthly to a named recipient

through the Crown Agents for the Colonies. The amount of any such remittance is entirely at the discretion of the officer.

Special Constabulary (Release Benefits)

Mr. Alport: asked the Secretary of State for the Colonies whether he will consider issuing a contract of service to the Malayan Special Constabulary; and what gratuity it is intended to pay these men at the termination of the present emergency.

Mr. Hopkinson: I am not aware of any need to vary the present arrangement whereby the terms of employment of the Special Constabulary are laid down in the Essential (Special Constabulary) Regulations, 1948. The question of release benefits is at present being considered by the Government of the Federation.

Mr. Alport: Is my right hon. Friend aware that these men have given as a whole very loyal and valuable service in the emergency, and there is a feeling that they suffer from disabilities in regard to, their service conditions which do not apply to the Regular Police? Would he therefore look into this question again with a view to considering the just complaints which are forthcoming from the supplementary police?

Mr. Hopkinson: I think everybody would agree with what my hon. Friend has said in regard to the services which the special constables have rendered and are rendering. Certainly those services and their value will be taken into consideration when deciding upon the release benefits. These are at the moment being discussed.

Oral Answers to Questions — HONG KONG

Chinese Aliens (Deportations)

Mr. S. O. Davies: asked the Secretary of State for the Colonies how many Chinese have been deported from Hong Kong this year; what were the reasons for the deportations; and how many of them were trade union officials.

Mr. Hopkinson: As the answer to the Question is rather long, I will, with permission, circulate it in the OFFICIAL REPORT.

Mr. Davies: Can the right hon. Gentleman give an assurance that no


effort is being made in Hong Kong to suppress the trade union movement?

Mr. Hopkinson: Yes, I can give the hon. Gentleman that assurance.

Following is the reply:

Seven hundred and ninety-two Chinese aliens were deported from Hong Kong, under the Deportation of Aliens Ordinance, between the 1st January and the 2nd May, 1952. The breakdown of this figure is as follows:


No.
Section of Ordinance
Remarks


709
3 (1) (b)
Persons convicted of offences in court.


40
3 (1) (c)
Persons summarily deported by the Governor in Council for the public good including:—




17 Trades Union officials and 7 Trades Union members who used their Union position for purposes prejudicial to the maintenance of law and order, and to the security of law-abiding citizens.




1 schoolmaster teaching Communist political doctrines.




5 agitators inciting disorders among the victims of the Tung Tau fire.




10 persons attempting to intimidate the local film industry into producing films with Communist bias.


43
3 (2)
Persons deported after inquiry by the Secretary for Chinese Affairs, including:




6 members of a gang which arranged illegal cntry permits and passports.




5 persons found selling indecent photographs.




7 persons found engaging in intelligence activities on behalf of a foreign power.




25 persons known to be guilty of various offences including murder, conspiracy, robbery, receiving stolenmoney, soliciting, smuggling, and illegal possession of arms.


TOTAL 792

Tung Tao Fire (Resettlement Villages)

Mr. S. O. Davies: asked the Secretary of State for the Colonies what progress has been made in rehousing the 16,000 people rendered homeless by fire at Tung Tao Village in Kowloon last November.

Mr. Hopkinson: I would refer the hon. Member to the reply given by my right hon. Friend to the Question by the right hon. Member for West Bromwich (Mr. Dugdale) on 12th March. The latest information available shows that up to 10th April a total of 1,214 houses or huts had been completed in six of the new resettlement villages; that an additional 710 were under construction or approved. Additional sites for 127 dwellings have been allocated.

Mr. Davies: Is the site of the old village where the fire took place being built on and, if not, could the right hon. Gentleman give us the reasons for not building on that site?

Mr. Hopkinson: That is another question, and if the hon. Gentleman will put it down I will get the information for him. I have not got it at the moment.

Oral Answers to Questions — COLONIAL EMPIRE (CORPORAL PUNISHMENT, JUVENILES)

Mr. Sorensen: asked the Secretary of State for the Colonies at what age juveniles can be sentenced to imprisonment in African and in West Indian Colonies; for what offences juveniles and adults can be sentenced to corporal punishment in the West Indies; how many were so sentenced last year; and what are the alleged causes of the greater proportion per population of juvenile offences punished by corporal punishment in East Africa as compared with West Africa.

Mr. Hopkinson: I am making inquiries about the first two parts of the Question and will write to the hon. Member when I have the information. As the reply to the rest of the Question is rather long, I will, with permission, circulate it in the OFFICIAL REPORT.

Mr. Sorensen: Would the hon. Gentleman say to what extent juvenile courts are operating in the Colonies now?

Mr. Hopkinson: That is a different question.

Mr. Sorensen: Will that be included with the information?

Following is the reply:

The numbers of sentences of corporal punishment awarded last year to juveniles and adults in the West Indian territories are as follows:


Colony
Juveniles
Adults


British Guiana
…
30
2


Barbados
…
Nil
Nil


British Honduras
…
20
Nil


Leeward Islands:
…




Antigua
…
23
Nil


St. Kitts Nevis
…
11
Nil


Montserrat
…
3
Nil


Virgin Islands
…
Nil
Nil


Windward Islands:
…




Dominica
…
38
Nil


St. Vincent
…
Nil
Nil

The 1951 figures for Jamaica, Trinidad, St. Lucia and Grenada have not been yet received. The following figures are for 1950:


Colony
Juveniles
Adults


Jamaica
…
…
343
208


Trinidad
…
…
39
Nil


St. Lucia
…
…
38
Nil


Grenada
…
…
2
Nil

As regards the last part of the Question, I assume that the hon. Member has in mind my reply to his Question on 21st May, which shows that the numbers of juveniles who received corporal punishment in the last year for which complete figures are available were approximately 32 per million of the population in West Africa and 46 per million in East Africa.

I regret that it is not possible to offer an explanation of this difference, which would not necessarily be the same in every year. Many factors may affect the situation, such as the prevalence of juvenile crime in different territories, the success of the police in apprehending offenders, the attitude of the courts to various offences and the existence of other methods of treatment.

Oral Answers to Questions — BORNEO (REVENUE AND EXPENDITURE)

Mr. Sorensen: asked the Secretary of State for the Colonies the estimated value of agricultural and other production in Borneo last year; the amount of Government revenue and through what sources it was secured; the total amount expended on education and medical services; and the amount allocated from the Colonial Welfare and Development Fund.

Mr. Hopkinson: As the Question necessitates a lengthy reply consisting mainly of figures, I will, with permission, circulate the information in the OFFICIAL. REPORT.

The following is the reply:

Agricultural production in Borneo both of subsistence and other crops is dependent to a large extent on individual smallholders cultivation and complete figures are therefore not available.

The value of produce exported for 1950 was:






$ (Malayan)


North Borneo
…
…
…
92,000,000


Sarawak
…
…
…
174,000,000


Brunei
…
…
…
205,000,000

2. The revised estimate of Government revenue for 1951 was:






$ (Malayan)


North Borneo
…
…
…
24,595,099


Sarawak
…
…
…
60,230,154


Brunei
…
…
…
68,719,000

These figures are subject to some adjustment when the accounts for the year are finally closed.

3. The main sources of revenue were:



$ (Malayan)


Customs Export and Import duties:—



North Borneo
16,500,000


Sarawak
36,000,000


Brunei
2,500,000


Licenses and Internal Revenue including income tax:



North Borneo
3,900,000


Sarawak
16,900,000


Brunei
40,000,000


Oil Royalties and Mining Rents:



Brunei
24,000,000

4. The revised estimate of expenditure on Education and Health Services in 1951 was:






$ (Malayan)


North Borneo
…
…
…
1,953,076


Sarawak
…
…
…
3,346,478


Brunei
…
…
…
698,327

5. The amount expended in Borneo from the Colonial Development and Welfare Fund in 1951 was £380,621.

6. $ = 2s. 4d.

Oral Answers to Questions — ROYAL NAVY

Aircraft Development and Production

Captain Ryder: asked the First Lord of the Admiralty what steps he is taking to reduce the delays in development and production of modern naval aircraft.

The Civil Lord of the Admiralty (Mr. Wingfield Digby): The Admiralty are in constant touch with the Ministry of Supply, which is responsible for the development and production of naval aircraft, in order to see if there are any ways in which we can assist in securing the quickest possible delivery of aircraft to the Navy. My hon. and gallant Friend will be aware that it was recently decided to accord super-priority to the production of the Gannet anti-submarine aircraft.

Captain Ryder: Is it not a fact that very serious delays have taken place in the production of naval aircraft? Can my hon. Friend say how much of this is attributable to the Admiralty and how much to the Ministry of Supply?

Mr. Digby: I can speak only for the Admiralty. We are certainly doing our best to overcome the delay.

Air Organisation (Evershed Committee)

Captain Ryder: asked the First Lord of the Admiralty what were the terms of reference of the Evershed Committee on Naval Air Organisation; what were its conclusions; and what action is being taken to implement its recommendations.

Mr. Digby: During 1944, Sir Raymond Evershed was attached to the Admiralty, on a part-time basis, and undertook an examination of the internal organisation of naval aviation, then known as the Fleet Air Arm. His report was a confidential document intended for the advice of the Board of Admiralty of the day. It is not the practice to publish the content, of documents of this kind or to indicate what measures have been taken as a result of the recommendations contained in them. I regret, therefore, that I cannot give the information requested by my hon. and gallant Friend.

Captain Ryder: Will my right hon. Friend bear in mind that it is generally considered that the Air Organisation of the Admiralty has many serious defects,

and is it not a pity to suppress a valuable report of this nature?

Mr. Digby: I do not think that any useful purpose would be served by my commenting further on its recommendations.

Recruits (Spelling Tests)

Mr. Follick: asked the First Lord of the Admiralty if he is aware that an eager long-service recruit was recently turned down by the Royal Navy and Royal Air Force because he could not spell conventionally such words as "secretary" and "discoveries"; and if he will see that spelling tests are not allowed to exclude worth-while candidates in future.

Mr. Digby: Spelling is only one part of a selection test designed to assess a candidate's suitability to join the Royal Navy. No candidate would be rejected solely because of his inability to spell correctly. I understand that similar conditions apply to candidates for the Royal Air Force.

Mr. Follick: While accepting that partly in good faith, may I ask whether it is not absolutely futile that a young man from a comfortable home, who is willing to enter the Navy as a recruit for long service, should be turned down because he could not spell one or two difficult words?

Mr. Digby: As I have pointed out, he was not turned down simply because he could not spell. I have seen the papers, and I do not believe that the spelling would be in conformity with the hon. Member's ideas on spelling reform.

Mr. Mikardo: is the hon. Gentleman aware that on this test neither Sir Francis Drake nor Lord Nelson would have been able to get into the Royal Navy?

Oral Answers to Questions — TELEPHONE SERVICE

Ministry of Supply (Calls)

Mr. Shepherd: asked the Assistant Postmaster-General the number of telephone calls, both local and trunk, made by the Ministry of Supply in the last recorded 12-monthly period.

The Assistant Postmaster-General (Mr. David Gammans): I would refer my hon. Friend to my reply of 21st May to my hon. and gallant Friend the Member for Renfrew, East (Major Lloyd).

Ministers of Religion

Mr. Patrick Maitland: asked the Assistant Postmaster-General whether he accords the same priority to parish clergy as to general practitioners in considering applications for telephone service.

Mr. Gammans: No, Sir, but we do give a measure of priority to applications from ministers of religion, especially in rural areas.

Mr. Maitland: Is my hon. Friend aware that in certain parts of Scotland, at any rate, clergy are given a very much lower priority, and that persons approaching death or in sickness are just as keen to have their minister as to have a doctor?

Mr. Gammons: The Post Office have never pretended that they can give to ministers of religion anything like the same priority as is given to doctors.

Oral Answers to Questions — NEWSPAPERS (POSTAL REGISTRATION)

Sir I. Fraser: asked the Assistant Postmaster-General the conditions required by his Department to enable a publication to be registered at the General Post Office as a newspaper.

Mr. Gammons: The conditions, which are statutory, are set out at pages 32 and 90 of the Post Office Guide, and in a leaflet of which I am sending my hon. Friend a copy.

Oral Answers to Questions — WORLD ECONOMIC SITUATION

Mr. Emrys Hughes: asked the Prime Minister if he will consider issuing invitations to a World Economic Conference to consider the continuing lack of balance between the dollar area and the rest of the world, the maintenance of full employment as defence contracts end and a world plan for economic reconstruction to raise standards of life, especially in undeveloped areas.

The Prime Minister (Mr. Winston Churchill): I hardly think that the time is ripe for summoning a new conference to consider these matters, which will, however, be discussed at the present Session of the Economic and Social Council of the United Nations.

Mr. Hughes: Does the Prime Minister not agree that economic conditions throughout the world are deteriorating and that while poverty and unemployment grow throughout the world the greater is the danger of Communism, and would he not be in favour of instructing our delegation at the United Nations to support the calling of such a conference?

The Prime Minister: Without going into all those important topics, I should not wish to alter the substance of my answer.

Mr. Gaitskell: May I ask the Prime Minister whether it is the case that the problem of the lack of balance between the dollar area and the rest of the world is being considered at the Economic and Social Council, and whether these three subjects will be discussed together since they are so intimately related?

The Prime Minister: The items on the agenda for the 14th Session of this Council, which opened on 20th May, again included the world economic situation, the economic development of underdeveloped countries and a report on measures for international economic stability. I should have thought that that would have included the very critical point mentioned by the right hon. Gentleman.

Mr. Gaitskell: I could not agree. As far as I am aware, this is not being discussed at the Economic and Social Council. In any case, if the Prime Minister thinks that that is the right place for these matters to be discussed internationally, why does he not send a much stronger delegation from Her Majesty's Government?

The Prime Minister: In any case, I am not proposing to issue invitations for a world economic conference as asked by the hon. Member.

Mr. Gaitskell: Will the Prime Minister not agree that these are matters of the greatest importance and that there is no international body which is effectively solving them at the moment? Will he, at any rate, consider whether preparations for such a conference could not be set on foot by informal discussions, for example, between the major powers concerned?

The Prime Minister: These matters are never out of the minds of Her Majesty's Government, and, indeed, our whole future depends upon them. We are striving our utmost to improve the position from what we found it when the right hon. Gentleman left it.

Sir H. Williams: Will my right hon. Friend study the reports of the World Economic Conference of 20 years ago, held in South Kensington, which was a complete flop?

The Prime Minister: I do not think in the circumstances that I need read it all.

Oral Answers to Questions — CORONATION DATE (MAYORAL ELECTIONS)

Mr. Marlowe: asked the Prime Minister whether he is aware that the Coronation date is one which comes shortly after mayor-making day throughout England and Wales; that in these circumstances the mayors concerned with the preparations will quit office just before the event and their successors will be newly in office; and whether he will introduce legislation to extend the current mayoral year by a fortnight or so to cover the Coronation date.

The Prime Minister: No such legislation is proposed. One of the reasons for selecting 2nd June as the date of the Coronation was to ensure that it did not clash with the local elections due in the spring of 1953.

Mr. Marlowe: While understanding the choice of date, does the right hon. Gentleman appreciate that many preparations will have to be made by the holders of these offices; that those who have made the preparations will go out of office just as they eventuate, and the result will be that the person who has to handle the job at the time will be a complete newcomer to the post?

The Prime Minister: There may be difficulties either way, but I am sure it is much better that the elections should be over before the Coronation begins.

Mr. Lindgren: May I ask whether the motive behind the Question is because the hon. and learned Gentleman is afraid there will be fewer Tory mayors?

KOREA (MILITARY SITUATION)

The Prime Minister: With your permission, Mr. Speaker, and that of the House, I should like to make a statement on the military situation in Korea.
Since the armistice talks began last July, there has been a great change in the military position in Korea. The Communist forces have taken full advantage of the lull in the fighting to reinforce, re-organise and re-equip their armies. The size of the force in the field against the United Nations Command is not far short of one million men, compared with a total of just over 500,000 last July. Although the number of enemy formations has been increased, this reinforcement has largely consisted of building existing units up to full strength. The fresh troops are mainly Chinese.
At the same time, the enemy's strength in armour and artillery has steadily mounted. They are now believed to have over 500 tanks and self-propelled guns. There have been large increases in the numbers of anti-aircraft and anti-tank guns, heavy mortars and field artillery. Rocket launchers have also made their appearance
Despite our air superiority over the immediate battle area, the enemy have also been able to build up large stocks of all types of supplies during the past ten months. There has been a marked increase in the size of the enemy air forces, which have about 1,800 aircraft compared with some 1,000 aircraft last July. About a thousand of these aircraft are jet fighters, mostly MIG 15s.
There is no evidence at present of an imminent enemy attack, but with their reinforcements, the Communists are now in a position to launch a major offensive with little warning and could maintain the initial pressure of their attacks for some time. The United Nations Forces have not been idle during the last 10 months. They now hold the most strongly defended line that they have ever occupied across the peninsula and they are, of course, backed by strong close support air forces.
Ground operations have only been on a small scale since last July, but the United Nations Air Forces carry out regular heavy attacks against enemy positions. These air forces are playing


a very important part in limiting the enemy's chances of launching a successful offensive. Their chief task is to put out of action and keep unserviceable the major North Korean airfields capable of being used for jet fighter operations. As an example of their success, our accurate night bombing made the Communists abandon their effort to base jet fighters on three new airfields, which they constructed in the Sinanju area last autumn, and on two other airfields, which they had enlarged to accommodate jet aircraft. The result of these operations has been that the United Nations has air superiority over the immediate battle area. A large proportion of the Chinese aircraft are still stationed in Manchuria. The lack of forward airfields would seriously handicap them if they attempted to carry out a sustained air offensive.
The other main objective of the attacks by our air forces is to disrupt the flow of supplies to the enemy, to limit their troop movements and destroy their supply areas. The success of these attacks has severely restricted rail traffic in North Korea and has forced the enemy to limit vehicle movement almost entirely to the hours of darkness.
Ground operations in Korea consist at present of reconnaissance patrols and probing attacks. Our Forces hold strong defensive positions, strengthened by field fortifications, wire and mines and the Communists have also strengthened their defences. Patrolling is active and determined on both sides.
The Communists have launched a number of attacks of up to regimental strength, supported by heavy concentrations of artillery and mortar fire. These attacks have been contained by United Nations Forces and in almost all cases any ground lost initially has subsequently been regained. In this static situation, the United Nations Command is taking every opportunity to relieve units for rest and re-training.
Ships of the Royal Navy are operating on both the west and east coasts of Korea and serving with them are units of the Australian, Canadian and New Zealand navies. A force, including two British light cruisers and one British aircraft carrier, maintains command of the Yellow Sea and patrols the west coast of North Korea between the Gulf of the Yalu River and the Han River estuary, thus cutting

all enemy sea communications between China and North Korea and between North Korea and the battle area.
This force also prevents the enemy from invading the numerous islands lying off the west coast which are held and used by our Forces. Guns of our naval units also regularly engage enemy troops and other military targets on this coast. Our aircraft carrier provides coastal reconnaissance and daily air strikes against enemy targets on the mainland and gives close support to the army when required.
British destroyers are frequently engaged in vigorous and effective action off the North Korean coast. Her Majesty's ship "Charity" was recently straddled by four enemy guns while supporting American minesweepers in the Taedong estuary. She promptly returned the fire and knocked out three of the four enemy guns.
Although they have not recently been engaged in heavy fighting, troops of the Commonwealth Division take part daily in patrols and probing attacks, and they have maintained their reputation of being in the highest rank of the divisions in Korea. They are occupying one of the most vital defensive positions of the Allied line across the peninsula covering the approaches to the capital city of Seoul. There are Canadian, Australian, New Zealand and Indian units in addition to our own in the Division and their team-work under the most stringent conditions has proved an outstanding success.
The Royal Air Force squadron of Sunderland flying boats continues to take an active part in the anti-submarine and shipping patrols which ensure the security of the sea lines of supply between Japan and Korea. A number of R.A.F. fighter pilots have been serving with American squadrons and they have acquitted themselves with distinction during their tour of duty. South African and Australian squadrons have also been playing their part in United Nations air operations.
So far this year the losses suffered by the United Kingdom forces have been 68 officers and men killed and 168 wounded; four are prisoners of war and four are missing. Our total casualties since the beginning of the war in June, 1950, now amount to 3,250–513 killed, 1,601 wounded, 939 prisoners of war and 197 missing. Her Majesty's Government wish to express their sincere condolences with


the bereaved and with those who have been and are anxious about the wounded, missing and prisoners.
I am sure that the House will wish to record the admiration we must all feel at the bearing of all ranks in the trying conditions in Korea. We can only hope that a satisfactory armistice and peace settlement will soon crown the efforts they have made.
I have also to inform the House that my noble Friend the Minister of Defence has received an invitation from General Mark Clark to stay with him in Tokyo and visit the battle-front in Korea. I think it is most desirable that this invitation should be accepted. Lord Alexander proposes to go to the Far East at an early date. On his return a further statement will, of course, be made to the House.

Mr. Shinwell: The House will welcome the news which has just been imparted to us that the Minister of Defence will shortly proceed to the battlefront. At any rate, he will have the opportunity of entering into discussions with the commander on the spot so that, subsequently, we might be more fully informed on what is going on. I wish to ask the right hon. Gentleman one or two questions arising out of his statement. Probably he will agree that the statement is a strange commentary on the armistice negotiations which are now proceeding. He probably would also agree that the statement discloses a very grave situation—that Chinese and North Korean forces have available more than one million men and that they are liberally supplied with modern weapons, in particular modern tanks and 1,000 modern jet fighter aircraft. Moreover, it would appear that they are able to launch an imminent offensive if they are so disposed.
The question I should like to ask the right hon. Gentleman is whether the Government are being fully informed by the United Nations Command as to the steps which may be required to meet a major offensive of this kind. Presumably, British and Commonwealth troops would be fully deployed in a situation of this kind. The House will wish to have further information on these matters. I would also remind the right hon. Gentleman that

this is the first statement we have had on the course of military operations since the Government were returned last year. It might have been advisable if we had had more frequent statements.
Finally, may I ask him about the more than 900 British prisoners of war? Can the right hon. Gentleman give any information to the House about their treatment and their general situation? The House would wish to know what the position is in that respect.

The Prime Minister: I certainly could not answer that last question without notice. I should be very glad to answer it or to have it answered by my hon. Friend the Parliamentary Secretary to the Ministry of Defence.
With regard to the general situation, I should have thought what I have said to the House sufficiently sustained the right hon. Gentleman's contention that the situation is very grave. It is very grave, but the United Nations Commander, the American general on the spot, believes that the United Nations are capable of holding a violent offensive should it be made against them on the breakdown of the peace negotiations.
No one can pronounce about battles before they are fought, but that is the view that is taken by the military authorities of the United States who furnish, I think, nine-tenths or more of the troops engaged with the enemy—that should not be forgotten—and who are responsible for taking the necessary measures.
What those measures would be I cannot presume to forecast at all, but I feel that during the last 10 months we have been engaged in truce making under extraordinary conditions. I do not think there has ever been any will to peace on the side of the enemy, who were suffering so heavily when the truce was begun and who have certainly improved their position in the meanwhile.
The reason why we have not made a statement on the military operations is that no operations were going on apart from the air forays and the patrolling which I have described and which has also been fully reported in the newspapers. Of course, once the truce breaks down, if it should, and large-scale military operations begin, then much more frequent statements will have to be made to Parliament.

Mr. Shinwell: In view of the protracted nature of the armistice negotiations, would not the right hon. Gentleman agree that a case can be made out for the summoning of a United Nations conference—particularly of the nations participating in the Korean affair on the United Nations side—to consider the whole situation? Would it not be desirable that such a conference should be held?

The Prime Minister: That is really a question which might well await the return of my right hon. Friend the Foreign Secretary. It is not a purely military question by any means.

Mr. Driberg: Can we have an assurance that when the Minister of Defence is in Tokyo he will fully discuss the question of the possibility of having British representation at the truce talks and also the question of the conduct of the prisoner of war camps on Koje Island and, if possible, will visit the British troops who are now taking part in guarding those camps?

The Prime Minister: Lord Alexander and General Mark Clark are great personal friends. As everyone knows, General Mark Clark commanded an army under the supreme command of General Alexander. They are trusted friends who know a great deal about the subjects with which we are now concerned. I think that it would be a great advantage that they should talk all matters over freely between them, but I certainly would not presume to attempt to prescribe beforehand exactly how and in what way and to what extent they should deal with particular matters.

Mr. Hollis: Can the Prime Minister tell the House anything about Communist guerrilla activities in South Korea?

The Prime Minister: I have not any information on that, without notice.

Mr. A. Henderson: As a very large number of trained and experienced pilots are required to maintain a front line strength of 1,000 jet aircraft, can the Prime Minister say whether there is any evidence of the nationality of the pilots?

The Prime Minister: Certainly the Chinese seem to be picking it up very quickly.

Mrs. Castle: Further to the question asked by my hon. Friend the Member for Maldon (Mr. Driberg), is the right hon. Gentleman aware that what is worrying the House is the lack of reliable information available to us about the prisoner of war camps and about the screening of prisoners, and that we are anxious that there should not only be talks between the Minister of Defence and his colleague over there but that there should be, as a result of his visit, a full, factual report to the House on these points, which are most obscure at the moment?

The Prime Minister: I am sure that there is a great deal of concern over a lot of things that have happened in Korea. Everyone—no one more than our Allies in America—has not been by any means contented with the course which these events have taken. However, these matters are now receiving the concentrated attention of the Government principally concerned—the United States Government—which is acting for the United Nations and, I must again remind the House, which has the overwhelming majority of the Forces employed. Further measures are being taken and I think it would be wrong if the other nations who are contributing token forces, in many cases, to the United Nations armies, leaving the main bulk of the work to be done by the United States, did not take their part in this difficult question of the handling of the prisoner of war camps. It may well be that they will all make a valuable contribution, not only in forces, but in policy.

Lieut.-Colonel Elliot: Is not my right hon. Friend also aware that, although the House is distressed about the situation in the prisoner of war camps, it would not be correct to say that that is what is mainly troubling us? It is the grave general situation which has been disclosed, and which we hope will be discussed with the commanders in Tokyo.

The Prime Minister: Certainly.

Mr. Harold Davies: Does the right hon. Gentleman realise that the House is getting less information on the Korean situation than his equally great predecessor Mr. Gladstone was giving the House in the time of the Crimean War? Does he also realise that we on this side of the House could not throw our weight


into any major activity there without the information being before us? Will he, therefore, for the sake of the House, insist that the Minister of Defence supplies us with the information on the situation on Koje Island and at Pusan?

The Prime Minister: I am afraid I have not got at my fingers' ends the exact part which Mr. Gladstone took in the Crimean War; it was even before my time. There really have been no military operations on a large scale going on. Truce talks have been going on and, therefore, there has not been that regular military information which would be very right and proper in other circumstances, and which will, I can assure the House, be freely and fully given should we not, unfortunately, reach the conclusion of a lasting truce.

Sir R. Acland: Can the Prime Minister tell us anything about the work of the United Nations Civil Administration Command in Korea, the number and condition of civilian refugees in their care, who are alleged by reliable reports to be very numerous and in very bad conditions; and whether the British personnel take any share in the work of this Command? Could that also be considered by the noble Lord during his visit?

The Prime Minister: If the hon. Gentleman will put a Question on the Order Paper, I will see what information on this matter is at our disposal.

Mr. Cocks: Can the Prime Minister say where this great mass of material, including jet planes and self-propelling guns, came from?

Sir Waldron Smithers: Moscow.

The Prime Minister: Although there are movements ever being made in aerial locomotion, it would be premature to suppose that they came from the moon.

Mr. Nicholson: Could my right hon. Friend give us any information about contacts with the United States? Am I right in thinking that we are bound to make these inquiries through the State Department, and, if that is the case, could not some more direct channels be arranged?

The Prime Minister: Of course, all the regular contacts through the Foreign Office and the State Department continue, but we are in very close personal relationships with the leaders in the United States, and can at any time, if we desire, address them directly. My right hon. Friend the Foreign Secretary has been from hour to hour, during the last anxious days, in close personal contact with Mr. Acheson, and it must not be thought at all that matters rest upon the routine contacts established through diplomatic channels.

Mr. Nicholson: The Prime Minister has misunderstood the drift of my question. Is he aware that even the State Department finds difficulty in eliciting this information owing to internal American conditions, and would it not be more convenient to us to have more direct contact with the Pentagon?

Mr. Emrys Hughes: Is the Prime Minister aware of the great disquiet in this country, expressed recently by the Archbishop of York, about the widespread use of the napalm bomb, which is indiscriminately burning up villages, including women and children, schools and orphanage buildings, and so on? Is it not time that the Government realised that there is a great volume of opinion in this country that we should complete a withdrawal from Korea, because the war there can no longer be described as anything like an international police action, but as one of the most cruel and futile wars in history?

The Prime Minister: The napalm bomb is a question on which carefully considered answers have been given by my hon. Friend, and the whole matter was considered by the Cabinet in relation to the conditions of warfare now prevailing. As to the general case of the war in Korea, that occurred before we had to bear the burden of public office, but very prompt and courageous action was taken by the Labour Party, who were then the Government, and who gave immediate support to the United States, and thus a grave act of aggression was confronted with effective physical force.

COUNTING THE HOUSE

Mr. Fenner Brockway: I wish to raise with you, Mr. Speaker, a point of order of which I have given you notice. It refers to an event on Friday, and I have delayed it until today so that the hon. Member for Surrey, East (Mr. Doughty) could be present. I wish to ask if it is in order, and in accordance with the practice and spirit of the House, for an hon. Member to ask for a count with the object of adjourning the proceedings of the House, and then to absent himself from the House while the count is being taken?

Mr. Speaker: The hon. Member was kind enough to give me notice of his point of order. All I can say is that I have known it frequently done. It is generally the responsibility of the hon. Member who is in charge of a Motion to secure that he keeps a quorum of the House until his business is transacted. I know of nothing that is out of order in the practice to which the hon. Member refers; and, I repeat, I have known ht happen on many occasions.

Mr. J. Griffiths: As one who was present on Friday, may I ask you, Mr. Speaker, whether you are aware that the action of the hon. Member for Surrey, East (Mr. Doughty) in demanding a count and then walking out of the House was resented by all hon. Members?

Mr. Speaker: As the right hon. Gentleman may recollect, I came into the House when the count was actually in progress.

Mr. Pannell: Could you also inform me, Mr. Speaker, in relation to the same case, whether it is in accordance with the spirit of the House for an hon. Member to be associated during the morning as seconder with another Motion which, by the indulgence of the House, had gone through, and then, having got that Motion through, to call a count in order to jettison the Motion of my hon. Friend?

Mr. J. Griffiths: May I put a further point to you, Mr. Speaker? Counting out the House by the Opposition against the Government is party political warfare, but Friday is Private Members' day. In view of the fact that Private Members' days are not very numerous, but are few and far between, do you think that what was done was a desirable practice, and

that Private Members should be denied their opportunities by means of this practice?

Mr. Speaker: There is a special Standing Order dealing with Fridays and the counting of the House, and there is nothing that I can see in it to indicate that the counting of the House is at all out of order. Otherwise, the Standing Order would not be there. I must leave that to hon. Members' own views.

Lieut.-Colonel Lipton: Mr. Speaker, are you prepared to express an opinion on the good taste involved in a matter of this sort?

Mr. S. Marshall: May I inform the hon. Member for Eton and Slough (Mr. Brockway) that his own party did the same thing four weeks ago, on a Friday?

Mr. Brockway: Is it not the case that on the occasion when it was done on this side of the House, four weeks ago, the hon. Member who called for a count remained in the House while the count was being taken? Is that not always the practice, that a Member of the House is responsible for any matter which he brings to your attention?

Mr. Speaker: I can only repeat that it is the general practice of the House that the Member who is in charge of the Motion before the House is responsible for seeing that a quorum is present.

The Prime Minister: Would it not be a very serious matter, Sir, if a debate took place without a proper quorum of Members present?

Mr. Speaker: The Standing Orders dealing with the quorum are put in for that express purpose. The only convention of which I am aware—and I may as well mention it in this connection—is that I know it has been considered in the past to be contrary to practice to count the House when an hon. Member has the Adjournment Motion.

Mr. Lewis: When an hon. Member rises to catch your eye, Sir, and asks you to rule whether or not there is a quorum, is he not asking the Chair a point of order? Therefore, if he walks out while you are testing the House, or giving your Ruling. is that not really an affront to Mr. Speaker? Is it not an insult to Mr. Speaker whilst acting in accordance with his office?

Mr. Speaker: Opinions may vary on that, When an hon. Member draws the attention of the Chair to the fact that 40 Members are not present, he is not really asking for a ruling from the Speaker. He is setting in motion the Standing Order, in which the action of the Chair is automatic and is commanded by the House. In further reply to the right hon. Member for Llanelly (Mr. J. Griffiths), it is true that Fridays are Private Members' days, but matters of great controversy do arise on Private Members' days, and often they are not on party lines at all. Any Member who desires to bring the discussion to an end can avail himself of the Standing Order.

BALLOT FOR NOTICES OF MOTIONS

Road Safety

Mr. Viant: I beg to give notice that on Friday, 20th June, I shall call attention to the need for further measures to improve road safety and move a Resolution.

Mr. Speaker: Mr. Ivor Owen Thomas.

Mr. Pannell: On a point of order. Despite the protests on this side of the House, Standing Committee A has been summoned to meet at 4 o'clock and the hon. Member for The Wrekin (Mr. I. O. Thomas) has taken himself to that Committee. He consulted me before he went there. I have remained behind in the Chamber to raise this point, since we are both Members of Standing Committee A. I submit with respect that a Member who absents himself from this Chamber to pursue his duties elsewhere in the House should not be disadvantaged. May I ask for your guidance, Mr. Speaker.

Mr. Speaker: The rule is clear. If an hon. Member is absent from the Chamber

when the Ballot is taking place he must depute another Member to speak in his place; but unless he has done so no other hon. Member can do it.

Mr. Pannell: In the name of my hon. Friend the Member for The Wrekin, I beg to give notice that on Friday, 20th June, he will call attention to the present state of the education services of the country in relation to the promises made in the Act of 1944, and move a Resolution.

Mr. Speaker: I must ask the hon. Member if he has been deputed by the hon. Member for The Wrekin (Mr. I. O. Thomas)?

Mr. Pannell: I have not been deputed, Sir, but I would submit to you respectfully that in these circumstances I might reasonably be allowed to give notice on behalf of my hon. Friend.

Mr. Speaker: The rule is quite clear. Unless the hon. Member has been expressly authorised by the hon. Member who is absent, I must ask for another name to be called.

Undeveloped Areas (Assistance)

Mr. Ernest Davies: I beg to give notice that on Friday, 20th June, I shall call attention to the need to encourage effective international action to promote the economic and commercial development of the undeveloped areas of the world, and move a Resolution.

Political Parties' Accounts (Publication)

Mr. Hamilton: I beg to give notice that on Friday, 20th June, I shall call attention to the desirability of the publication of their annual accounts by political parties in the United Kingdom, and move a Resolution.

Orders of the Day — FINANCE BILL

Considered in Committee [Progress. 27th May].

[Colonel Sir CHARLES MACANDREW in the Chair]

4.8 p.m.

Dr. A. D. D. Broughton: On a point of order, Sir Charles. Would you be good enough to give your Ruling on a matter which is causing concern to a number of my hon. Friends and myself? As you know, the Government's Housing Bill has reached the Committee stage and is being considered by Standing Committee A. There are a number of important points in that Bill requiring careful consideration before the conclusion of the Committee stage. In order to force this highly controversial Bill hastily through Parliament, the Minister of Housing and Local Government has decided that the Committee will sit this afternoon at 4 o'clock. As a Member of Standing Committee A, I have received the usual form of notice of this Sitting at 4 o'clock today. I think I should inform you, Sir Charles, that when the Committee is sitting on this Bill frequent Divisions take place. This will be occurring at a time when the House is in Committee of the whole House considering the Finance Bill.
The question that I wish to ask you, Sir Charles, is, what are hon. Members who are Members of Standing Committee A to do in the not unlikely event of there being a Division upstairs in the Standing Committee at the same time as there is a Division here on the Finance Bill?

The Chairman: The hon. Gentleman very kindly told me he was going to raise this matter, and I thank him for his courtesy. I do not think that there is any real difficulty, because between a direction to clear the Lobby and the locking of the doors here there is an interval of six minutes. The worst that could happen would be for a Division to be called at the same moment in the Standing Committee, but there a Division takes only two or three minutes, and hon. Members would have plenty of time to vote there and then come here to vote. Otherwise, there is no difficulty, because under Standing Orders the Chairman of a Standing Committee has to suspend the

Sitting of the Committee to give adequate time for hon. Members in the Committee to come here to vote in a Division.

New Clause.—(PROVISION FOR INITIAL ALLOWANCES IN CERTAIN CASES.)

The Income Tax Act, 1952, shall have effect as if the following section were inserted after section 333: —
333A. Notwithstanding anything contained in subsection (7) of section two hundred and sixty-five or subsection (5) of section two hundred and seventy-nine of this Act, if a person on or after the sixth day of April, nineteen hundred and fifty-two, incurs capital expenditure which, but for the provisions of those two subsections, would qualify for an initial allowance under Chapter I or Chapter II or both those Chapters of Part X of this Act, there shall be made to such person an initial allowance in respect of such expenditure under section two hundred and sixty-five or section two hundred and seventy-nine of this Act, or both such sections as the case may be, provided nevertheless that such initial allowance or the aggregate of such initial allowances (if more than one) shall not exceed. in respect of any one year of assessment, the sum of one thousand six hundred pounds, and if a person has incurred expenditure which (but for the subsections aforesaid) would, in respect of any one year of assessment, have qualified for an initial allowance or initial allowances in excess of one thousand six hundred pounds, such person shall be entitled to elect how such one thousand six hundred pounds shall be apportioned as between the various types of expenditure incurred by him which (but for the subsections aforesaid) would so qualify:
Provided that the giving of such initial allowance or initial allowances as aforesaid shall not increase the amount of any tax for which such person or any other person would or might become liable by way of balancing charges or otherwise above the amount for which such person or other person would have been liable if no such initial allowance or initial allowances had been given.—[Mr. Albu.]

Brought up, and read the First time.

Mr. Austen Albu: I beg to move, "That the Clause be read a Second time."
It may be for the convenience of the Committee if I say at once that I have received information that the Derby has been won by Tulyar—though I am not interested myself.
The purpose of this Clause is to restore the initial allowances for certain capital expenditure of a limited amount, and so to be of particular benefit to small manufacturing companies. Let me remind the Committee of what the situation was before the Finance Act of last year.


Prior to that time there had been initial allowances granted to new capital expenditure, chiefly for new buildings and new plant and machinery. It was originally instituted in the Act of 1945 and at the time of the Finance Bill of last year it largely was to finance plant and machinery, and to finance new buildings.
4.15 p.m.
These are not remissions of taxation or allowances against taxation, but really in the nature of interest-free loans, because, of course, the initial allowance only reduces subsequent depreciation allowance during the life of the plant or equipment. The conditions under which they were granted were, in fact, all incorporated in a large number of pages comprising Part X of the consolidated Income Tax Act of 1952, but the whole of that Part X is wiped out by subsection (7) of Section 265 and subsection (5) of Section 279, which wiped out initial allowances for building and plant and machinery respectively, thus bringing in the alterations made in the 1951 Act.
The proposal of this new Clause puts a limit of £1,600 on the allowance which would be granted for either new plant and machinery or new building. Of course, the intention of the limit is to ensure that the benefit of the Clause—of the change: of the restoration of the allowance—shall go to small companies. I readily admit that it would have been better—more satisfactory—for our purpose if we could have restricted it in that way, but I believe that it is administratively very difficult, and that in limiting the total amount we probably achieve the same effect, because the amounts that we have fixed as the limit would be less beneficial for a company of substantial size.
In most cases the use of the allowance for spending on new buildings and machinery out of ploughed back profits would nearly always be spent on machine tools and things of that sort. Nearly always the 40 per cent. Allowance would be so employed, and it would be equivalent to £4,000 spent on new machinery.
There are one or two matters to which hon. Members have drawn my attention, and they all agree that if one of these could be dealt with, it would improve the Clause, and that is the question of motor cars. There is a general feeling

that in many cases initial allowances in small businesses were used for the purchase of motor cars. I do not think my hon. Friends and I would object to any Amendment to restrict initial allowances so as not to include motor cars. However, that does not affect the general purpose of the Clause.
My hon. Friends and I put down a number of Amendments to various Clauses of the Bill, all designed to assist the small companies, particularly the small manufacturing companies. It is very difficult to give a direct assistance and ensure that it will have the effect we actually want—of improving the efficiency and helping the expansion of those small companies. My views on the use of profits and ploughed back profits are, I think, quite well known to the Committee, but I have never hidden from the Committee my view that a small company does need assistance because it is in the most difficult position.
By a small company I mean one that may be employing about 50 people. It often has great difficulty in taking the initial steps towards substantial expansion, towards the optimum productive level. Particularly would it be difficult at the present time, not only because of the increased burden of taxation, particularly of the Excess Profits Levy as it falls on expanding companies, but also because of the very much tighter credit conditions which have been imposed by the Chancellor, and which, of course. Fall first on the small company without much security—whose business reputation is still something of doubt.
These companies find great difficulty in getting additional capital. They mainly get it from the banks, and the present conditions make that more difficult. It is more difficult to get credit there in present conditions. The financial houses, of course, are not interested. It is not worth their while to be interested in the small company. It is not worth the expense of negotiating the finance in the case of small companies because of the smallness of the amount. It is not worth the while of the financial houses to be interested in them—not even of those set up to deal with the relatively small companies.
I hope that we shall receive on this occasion some sympathy from the other


Side of the Committee, because last year we spent 11 hours in the middle of the night—right through to the morning—debating the abolition of the initial allowances which was brought in by my right hon. Friend the Member for Leeds, South (Mr. Gaitskell). A great deal of the debate, of course, was directed towards the exclusion of particular interests, but substantial arguments were also advanced against the abolition of the initial allowances at all.
I would be the last to say that today—that now—would be the time to restore initial allowances completely. That would be absolute nonsense. The conditions in which my right hon. Friend abolished it as a whole still exist—in fact, have been much reinforced by the Chancellor in his Budget speech, and in other speeches he has made on economic affairs. when he has referred to the necessity for increasing our engineering exports and our exports of capital goods and the consequent necessity to reduce investment in those goods at home. I must say that we welcome repentant sinners from the other side of the Committee who now realise the reason why my right hon. Friend abolished the initial allowances over the whole of industry last year.
However, I believe that there is this special case for the small company. I should like to quote—the only quotation I am going to make from the many speeches made during those hours of the night last year—from the speech made then by the present Chancellor of the Exchequer. He said:
I do not claim, and I am not going to make any claim, that the system of initial allowances is ideal. It is one to which a good deal of careful consideration can be given by the Committee and there is no doubt that these allowances are a form of loan to industry, and that they are not so valuable to large businesses with capital as they are to small firms.
He went on:
In general they have formed a valuable aid, particularly to small businesses, and their removal by the Bill, unless we can wring a further concession from the Chancellor, will come as a shock to a variety of industry."—[OFFICIAL REPORT, 8th June, 1951; Vol. 488, c. 1542.]
I give the Chancellor of the Exchequer credit for that, at any rate; whatever he may have said in public, he knew what the situation of the country was last year, and when he made those remarks he must

have been fully aware of the position in which my right hon. Friend was introducing his Budget. We are fully aware of the circumstances at the present time.
But, of course, there has been a substantial change since that time, and that has been a recurrent theme in the debates we have had in this Committee, and that is, that while there is a general inflationary movement in some parts of the economy, particularly the capital goods industries, there have been very considerable reductions of industrial activity in other parts of the economy, particularly in Lancashire and the textile areas, and there is a general view that there has got to be some recruitment of new industries in those areas. Nor is it necessarily the case that such recruitment cannot make its contribution towards re-armament and the export drive.
It is generally held that a re-armament programme involves a good deal of subcontracting and the bringing in of small firms, and, of course, we know that, for various reasons, it is extremely difficult to increase the output in some parts of the country because of the shortages of labour and the maldistribution of housing. If it is necessary to bring new industries to take their part in the re-armament programme and in the export drive, particularly in engineering products, into Lancashire, it will be necessary to ensure that the businesses that go there are enabled to expand to reasonable size.
I think that that is the strongest argument we can put forward for this Clause, apart from the general argument about the necessity for helping small companies. The initial allowance is a particularly suitable type of assistance because it ensures that relief is given only in respect of profits that are ploughed back and actually used; and, of course, they would be used for plant and machinery—machine tools—to assist modernisation and the expansion of output. I hope that in view of what I have said, and in view of the obvious sympathy of hon. Gentlemen opposite that they expressed when they were on this side of the Committee last year, we shall receive a favourable reply to this proposal.

Mr. Gerald Nabarro: I was one of the Members sitting on the other side of the Committee last year who had a great deal to say during our


protracted debate about the merits or otherwise of Income Tax initial allowances in industry, and I must confess that I supported from the Opposition benches the plea made by the present Chancellor of the Exchequer and my hon. Friends for the retention of initial allowances in certain circumstances; but I did so with a good deal of diffidence.
In my view, the system of initial allowances is a bad one. Sir John Anderson, who is now Lord Waverley, introduced it in 1945 as a palliative. The late Sir Stafford Cripps, in 1949, doubled the rate of initial allowances in so far as plant and machinery were concerned, but I still tended to regard initial allowances—and I was supported by a substantial body of opinion in the chartered accountancy profession—as only a palliative.
What a great deal of informed opinion was hoping was that these palliatives would lead to what is urgently needed in our fiscal system, an arrangement for the revaluation of industrial fixed assets which would allow a proper rate of depreciation and a full allowance for obsolescence in respect of plant and machinery bought in pre-war years and still in use.

Mr. Albu: The hon. Gentleman referred to the opposition of the accountants, chartered and otherwise, to initial allowances. He will probably be aware that they are very divided about the revaluation of assets. I think the majority are against it.

Mr. Nabarro: That is not a view that I take. The majority of chartered accountants concerned with industrial accounts, at all events, recognise the wisdom of introducing some arrangement for the re-valuation of fixed assets.
It is instructive for the Committee to observe what took place in Belgium and many other Western European countries after the war. There, they embarked upon a planned system for the revaluation of fixed assets especially to overcome the particularly difficult point of plant and machinery bought in prewar years and depreciated on a basis that had been arranged in pre-war years. When the plant and machinery came to be replaced in the post-war years it was found that the company seeking replace-

ment had to pay three or four times the price for the new machinery.
The initial allowance system had many disadvantages. The hon. Member referred to the fact that my right hon. Friend called it a type of loan. I have always believed that it should have been recognised simply for what it was, an interest-free loan and nothing more. Many companies in receipt of that 40 per cent, initial allowance would, when they made up their accounts at the end of the year, deliberately take advantage of the initial allowance by placing it to a special reserve account in order to offset over the remaining life of the plant and machinery, the reduced annual rate of depreciation, which is a consequence of the initial allowance at the rate of 40 per cent. In the case of many small companies—the hon. Gentleman may not like this very much, but it is true—the initial allowance was an encouragement to extravagance and the purchase of plant and machinery that was not necessarily immediately required. That is one reason why the new Clause should be rejected.
There is a further point that I should like to make in reply to the hon. Member for Edmonton (Mr. Albu). He referred to the difficulty of small companies in financing expansion. Over the years he and his hon. Friends have been staunch supporters of such houses as the Industrial and Commercial Finance Corporation and the Finance Corporation for Industry, which were set up at the end of the war primarily to deal with the problem of financing the expansion of the medium and small companies.
The Finance Corporation for Industry dealt with the larger applicants and the Industrial and Commercial Finance Corporation with the smaller ones. The two together dealt with applicants for money for expansion purposes, who were not in a fit financial condition to go to the money market or Stock Exchange and promote a loan or a new issue. Today, the genuinely small company which seeks to expand, can find its money from a number of reliable sources, through houses of that sort or by recourse to the established practice—there is nothing wrong with it—of buying plant and machinery on a hire-purchase basis, which is done by very many small companies who are seeking expansion.
I object to initial allowances, in principle. I recognise that they served a useful purpose between 1945 and 1952, but I should most certainly object strongly to any move to reintroduce them on a qualitative basis, restricted only to a certain class of company. If we reintroduced them at all we should have to do so universally; we must not approach the problem in that way. I believe that the revaluation of fixed assets and the overhaul of the machinery of depreciation allowances and obsolescence is a preferable course to going back to a limited system of initial allowances.

4.30 p.m.

Mr. Frederick Mulley: The hon. Member for Kidderminster (Mr. Nabarro) scoffs at the conception of an initial allowance because he says that it is an interest-free loan. We do not dispute that, but—

Mr. Nabarro: I called it a palliative and said that it served its purpose; I did not scoff at it.

Mr. Mulley: The hon. Member can only make his speech; it is for the rest of the Committee to interpret the tone in which he made it, and that was what I was doing in using the term "scoff." It is precisely because it is an interest-free loan that the Opposition realise that the initial allowance has made a substantial contribution to industry. All the suggestions which came from the hon. Member about hire-purchases, finance corporations and so on involve a very great interest cost to small firms. Surely, from the point of view of a business man an interest-free loan is a better proposition than any other scheme, particularly at a time when the Chancellor has made the cost of borrowing very much higher than it was before?
The most significant part of the hon. Member's speech was the reference to revaluation of assets. He quoted the accountancy profession in support of the argument. I am not in a position to say whether it would have the full support of the accountancy profession, but, even if it did, that is not a very strong argument. The Committee must view the situation of the economy as a whole. I should strongly oppose the suggestion that fixed assets should be revalued, for that would give preferential treatment to one class of taxpayer as opposed to other classes.
When a company comes to replace machinery bought pre-war—we realise it is a difficulty—the cost is probably three or four times the pre-war depreciation arrangement. At the same time, the school teacher who saved for retirement on a pre-war salary is having to meet three or four times greater expenses today. The whole question of changes in the value of money affects not only industry but all classes of taxpayer, and it would be very wrong to give industry preferential treatment of this sort.
The hon. Member said that the initial allowance led certain companies to extravagance. I agree wholeheartedly that there is some substance in the criticism. The kind of extravagance that we should particularly oppose is the purchase of cars for directors to run about in out of the 40 per cent. initial allowance. We should be against it as we are against all sorts of extravagance of that kind. But can the hon. Member really look at British industry today and say that any firms can be accused of extravagance in the provision of up-to-date machinery and equipment? The small companies who would be the main recipients of the advantage are, by and large, very much out of date compared with the methods used by the best firms in the same industries.
I ask the Government to give favourable consideration to the Clause. It may need to be redrafted. Perhaps it may be possible administratively to limit the extension to small companies only. I can think of a great number of companies in important industries who would benefit from an initial allowance, companies which badly need new capital equipment not only on grounds of productivity but also for improving the conditions of their workers.
I have in mind the cutlery industry in Sheffield, a typical little masters' industry, where capital is needed to make the working conditions tolerable for the workers. That industry is feeling the main brunt of the reduction in exports to Australia and other fields, and it would find it very difficult to raise money in the open market or from the banks for the new equipment to modernise the firms and improve the working conditions in order to attract labour in a city where labour is in great demand for re-armament purposes. One could multiply the examples where in the


national interest increased productivity for export is a very vital matter and yet the firms, except at an exorbitant cost, cannot get the interest-free loans which we would wish to provide by this means to a maximum of £4,000 in one year.
Another industry which should appeal to the Government Front Bench is the building industry. Many builders could improve their house production capacity by means of this proposal. I have specially in mind the brickyards. Brick production has risen steadily over the last year. An examination of the figures will show that this is almost entirely due to increased Fletton production by the large people in the industry who have no shortage of capital.
However, if we are to get enough bricks for housing and other projects we must get more bricks from the small brickyards, and they are, in almost every case, held up for capital. They would welcome the Clause not only as a means of enabling them to re-equip and modernise their plant but also as a means of enabling them to make a contribution to the building programme. There are many other fields in which this would be an advantage to the small company.
The Opposition believe that the small company has a right to be considered as well as the large company. It is fancy thinking to imagine that the future of the country has to depend entirely on the large firm, especially in the case of many craft industries: As I know from my experience in Sheffield, small firms have played, and will continue to play, an important part in our export trade.

Mr. Hugh Gaitskell: As my hon. Friend the Member for Edmonton (Mr. Albu) pointed out, the general issue of the initial allowances was discussed at great length during the Committee stage of last year's Finance Act. For hour after hour Conservative hon. Members moved Amendments, and throughout virtually the whole of that night my hon. Friend the Member for Brighouse and Spenborough (Mr. J. Edwards) answered Amendments very faithfully and thoroughly. We ended the debate with a discussion on the general principle, when the Chancellor was the chief spokesman for the Opposition Front Bench at that time.
At that time, the attitude of the Conservative Party was wholly opposed to our proposal to suspend initial allowances. Yet when they came into power the first thing they did was to say, "It is part of our policy that initial allowances should be suspended." I do not object to that. We treat with the contempt that it deserves any pretence that hon. and right hon. Gentlemen opposite have not changed their minds. If they try that kind of thing on they must expect to get a sharp reaction, as the Solicitor-General had yesterday from my right hon. and learned Friend the Member for Neepsend (Sir F. Soskice).
But if they come forward and say, "On further consideration, we think it is the right thing to do and our predecessors were right," that is a perfectly sensible and natural attitude to adopt, and I shall not complain about it at all. Indeed, I always feel a certain glow of pleasure when I see in Government statements and speeches a sort of pride in the fact that the initial allowances are now to be suspended and that that is making it so much easier for them to control investment.
We are now discussing the special case of the smaller companies. If it is felt, as it may well be felt, by some hon. Members opposite that we did not pay enough attention to this last year, I am ready to concede that that may be so, but I would say—I shall explain why in a moment—that there has been a change in credit policy which has made the problem much more acute than it was then.
We should all agree that we want to see the smaller companies growing. That is of fundamental importance to British industry, because if they are handicapped by difficulties in raising capital, then undoubtedly we are going to have a more monopolistic structure and we are going to lose new blood, all of which is going to be bad for productivity. One of our complaints against the Excess Profits Levy is that it penalises a number of growing companies, and here in this Clause is an attempt to try to get over the difficulty.
I referred just now to the change in the situation resulting from the new monetary policy. It would be going a little too far if I were to discuss that in any detail, but it has a bearing on this


subject. It is a type of credit control, right or wrong, which is bound to hit particularly hard the smaller companies, and especially the company with small reserves. The larger concerns who have been building up reserves over a longer period of years will find it assists them in their financial development, and equally when it comes to borrowing from the banks the larger borrowers will have a substantial advantage there.
As the hon. Member for Kidderminster (Mr. Nabarro) said, special institutions were set up to deal with this sort of problem, and I think the I.C.F.C., which is particularly concerned with smaller firms, has done a very good job in the last few years in a limited field. But it is not large enough to protect the smaller companies in the existing circumstances.

Captain J. A. L. Duncan: Everybody so far has been talking about small companies, but as I read the new Clause it applies to individuals and particularly to agriculture. Does the right hon. Gentleman include the individual and the farmer?

Mr. Gaitskell: Yes, the hon. and gallant Member has read the Clause correctly. My hon. Friend the Member for Edmonton pointed out that it was not exactly as we might have preferred it, because it simply enables an initial allowance of 40 per cent. To be claimed on the first £4,000 in the case of plant, machinery and capital expenditure. That is because with the limited resources we have we could not devise a Clause which would confine this only to the small company. If that were possible I think my hon. Friend would agree that it would be an improvement on this Clause.
Let me say straight away that if that is the Government's view, and if they feel that there is a case made out for helping the smaller company or individual, and they can redraft the Clause accordingly, I am sure that we should be very happy with that solution.
4.45 p.m.
It may be said that this will involve a serious loss of revenue, particularly in its present form. If that is the argument the Government are going to put forward they should think again, because this is not a matter which should be looked at from the revenue angle. As a matter of fact, any loss that may be sustained on

taxation will be offset by the rise in undistributed profits. When I was introducing the suspension last year and pointing out that in consequence of the suspension of the initial allowances there would be an increase in revenue, though not in the first year as it did not operate but in the next year or the year after that, I made it plain that that would be offset by a decline in company savings. From the economic point of view, the real factor is the effect on investment and on the demand for machinery, plant and buildings. It must be considered only from that angle.
From that angle, what are we to say? The Government may argue that even in present circumstances it is more than ever necessary to keep down investment. I do not know how far the measures they have adopted are being successful. On these benches we do not challenge the need to keep investment down in present circumstances, regrettable as it is, but what we feel is that these measures for restricting credit and investment should not be allowed to affect the smaller companies, or partnerships or farmers in such a way that they are squeezed out in the general squeeze, because I am sure that that would be thoroughly bad for British industry and for agriculture.
That is the reason why we feel that something should be done for a limited restoration of the initial allowances so as to provide for the first £4,000 on capital expenditure. As I said earlier, if we could have found a way of confining that to smaller companies, partnerships or organisations then so much the better. I think, however, it is necessary to tackle this problem.
There can be no doubt that the financial and fiscal policies which have been pursued for a number of years, and which in my view are quite inevitable—and I mean by that to some extent the degree of taxation—are liable to hamper the development of the smaller companies. That cannot be avoided if we are going to have the social services that we have, and if we are going to spend as much on defence as is necessary to protect us in these difficult times. I think we can say that for the present we are not going to get any substantial reduction in taxation.
But that is not an argument for doing nothing about this particular problem. On the contrary, it is better to face up


to it, and see what are the consequences of the fiscal policy. Some hon. Members may disagree with the fiscal policy which we feel is going to stay. But in those circumstances we say to ourselves, how can we protect the small company? It is for that reason that we urge the Government to face up to this problem, and I very much hope that, if they cannot accept the new Clause, at any rate they will consider the matter and show they are in agreement with us in principle, in which event on the Report stage they may present something which will meet the problem more adequately.

The Parliamentary Secretary to the Ministry of Civil Aviation (Mr. R. Maudling): We have had a very interesting debate on this subject, and I have no doubt that on both sides of the Committee there has been agreement with what has been said by the hon. Member for Edmonton (Mr. Albu) and by the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) as to the importance of assisting small companies. It is from small companies that large enterprises grow, and in an industrial structure as varied and complex as ours obviously the position of the small company is one of great importance. That fact is very much in the mind of the Chancellor of the Exchequer, but that does not necessarily mean that the Government can accept that this Clause is a suitable method for assisting the small company.
The debate at one time threatened to range over a very wide field indeed, especially when my hon. Friend the Member for Kidderminster (Mr. Nabarro) went into that fascinating subject of replacement costs and depreciation, and put forward proposals for basing depreciation on replacement costs, which operation would cost about £300 million a year in revenue. That brought us from the main question, which is that of initial allowances and their value to industry as well as their place in the system of economic planning or economic guidance by the Government. It has been generally accepted on both sides that initial allowances are interest-free loans, and it is perfectly true that in many cases when they are granted companies immediately set up a reserve in respect of them.
Initial allowances are of great assistance to companies, and the original object

of introducing them was to stimulate investment in new plant and machinery. The initial allowances were used by the previous Government as part of their economic planning system, and they were increased in 1949 as a measure designed to encourage further investment in plant and machinery. Last year the right hon. Gentleman cancelled the initial allowances, because he argued—

Mr. Gaitskell: Not cancelled, suspended.

Mr. Maudling: I am much obliged to the right hon. Gentleman for the correction.
He suspended the allowances largely because of the need to free resources for the defence programme. That, I think, underlies one of the main reasons why the shipping industry, for example, was given special treatment in the Finance Bill last year. That reason holds good today. I am sure that the right hon. Gentleman would agree that the needs of the defence programme are just as strong and the general economic case against enacting initial allowances is even stronger than last year, because the emphasis on the export of capital goods has to be stronger now than a year ago.
We have seen with the development of competition a growing toughness in the consumer parts of the export market. Accordingly, there has to be a switch over of a larger portion of the products from our engineering industry to exports. Therefore, the need for damping down the demand for capital goods and machinery is stronger than it was last year, and the Government cannot agree that the need to damp down the demand for such goods is any less than it was last year. For that reason we could not agree to any general restoration of the initial allowances.
The question, therefore, comes down to this: is there a case for giving special treatment to the small companies? That, I understand, was the argument behind the speech of the hon. Member for Edmonton. It is arguable, and the case has even been made, that measures restricting credit and tightening credit generally fall heavily on the small rather than on the large company. I think that that argument can be carried a little too far, because many large companies are finding conditions at the moment by no means easier.
Whether that argument is true or not, what I would say is that if it were the intention to give special assistance to the small company over and above the special assistance in matters of taxation which small companies already receive, then this would not be a good way of going about it. In the first place, this particular concession to the small company would undoubtedly encourage further expenditure on capital equipment at a time when we do not want, by general consent, to encourage that further expenditure.
Secondly, it is impossible to distinguish between small companies and large companies and between certain industries and other industries. The hon. Member for Sheffield, Park (Mr. Mulley) quoted certain industries for which he said there was a special case for the giving of further tax assistance for expansion. I would suggest to him that it is a fundamental principle of taxation that there can be no distinction between industry and industry in matters like this, and there must be rules which have a general application.

Mr. Mulley: I only mentioned those industries as an example of many that would benefit by the proposed new Clause to which I had added my name. I certainly did not ask for special treatment for certain industries. That is a distortion of my argument.

Mr. Maudling: We are at one on this. My point is that we cannot have special measures for special industry. By helping some people we would help the whole range of industry to spend more on capital goods, which would be undesirable and would not, I think, be of assistance to the smaller companies which hon. Gentlemen opposite have in mind. It is suggested that assistance be given to spend up to £4,000 in a given year upon new capital equipment, but very small companies in many cases would not be able to do that. Some smaller companies are more concerned about carrying stocks than the cost of new equipment. Therefore, it would not necessarily assist the small companies.
On the other hand, this proposal would undoubtedly help companies which are medium and large, and that leads me to the next point which I wish to make, which is that the cost of this particular proposal—I must say when I first

saw it it was a surprise to me and I had the figure checked again—would be of the order of £50 million a year which is a very large amount. The right hon. Gentleman rather forestalled this argument by saying it is not a question of revenue, and that if taxation were reduced here increased savings would counter-balance it.
But that is not a very valid argument. The purpose of this concession is not to increase the savings of the small companies, but to increase their ability to spend money on capital equipment. Either this proposal increases the demand on capital equipment or it does not. If it is not designed to increase the demand for small companies' capital equipment it seems to have very little purpose. If it is designed to increase that demand, it runs counter to the principle which has already been mentioned, that this is not the time to stimulate every demand for capital equipment.

Mr. Gaitskell: What I was saying was not that this proposal would not involve any increased demand for capital equipment but that, from the narrow budgetary angle, the two sides cancel out. leaving us with a net increase in investment. I admit that would be the result, unless we took steps to reduce investment in other ways.

Mr. Maudling: The right hon. Gentleman mentions the Government's concerning themselves with the narrow budgetary aspect, and I agree, but I was addressing myself to the broad economic aspect. The proposed Clause is a proposal to increase expenditure on capital equipment, which is precisely what we do not want to do at this juncture. We have made a number of proposals in the Finance Bill for concessions designed to assist small companies, such as the proposals in relation to the Profits Tax and the Excess Profits Levy.
In this case, the Chancellor feels that in those ways we can best assist small-developing companies, which are the companies which we have in mind on both sides of the Committee in this matter. He does not think that the proposal now before us would achieve the object which hon. Gentlemen opposite have in mind, in view of the very high cost, which is a genuine economic cost and not a narrow budgetary cost, of something like £50 million. I must


therefore ask the Committee to reject the Motion.

Mr. Anthony Crosland: The Parliamentary Secretary's reply is not good enough. In the first half of it he made the disgraceful admission that the whole of the hours which his party spent last year debating this matter on the Finance Bill were a display either of ignorance or of complete hypocrisy, and that the views that they put forward last year meant absolutely nothing to them. They have had an opportunity this year to put those views into the Finance Bill and they have not taken it. This is the most extreme instance we have had.
The Parliamentary Secretary has today admitted that the case for suspension of initial allowances was extremely strong last year, but why did he not realise it last year, and why did his hon. and right hon. Friends not have the intelligence to see it last year? He has no difficulty in seeing it today. It is intolerable to think that the Front Bench opposite should be put so often in the humiliating position of having to say that every word they spoke last year was absolutely wrong. Personally, I am getting rather sick of it.
When the Parliamentary Secretary came to the general argument he spent the greater part of his time in saying that there was no general case at the moment for restoring initial allowances. Of course there is not. He did not need to spend five minutes saying that. We have admitted it on this side of the Committee.

Mr. Maudling: The proposed Clause does generally restore initial allowances.

Mr. Crosland: It does not generally restore initial allowances. The figure of cost which the hon. Gentleman gave, compared to the cost of fully restoring initial allowances, will show that. The ratio must be about six to one.
This proposal is only for a very partial restoration of initial allowances. Nobody has argued on this side for a complete and general restoration of initial allowances. We accept, as hon. Gentlemen opposite accept this year but did not have the sense to see last year, that during the period of re-armament and with the export position as it is, there can be no

case for putting back the whole system of initial allowances.
5.0 p.m.
Our case was that, even though we cannot restore the general allowances back to the position at which they stood last year, there is a special case for assistance to small companies. The hon. Member for Kidderminster (Mr. Nabarro) half admitted this. He was sympathetic, but he did not like this method of doing it. The Parliamentary Secretary to the Ministry of Civil Aviation also admitted it, but said that this was not the way to do it. Having said that, he gave no suggestion of the right way to do it.
He said that the Budget gave a lot of assistance to small companies. I must say that nobody has noticed that yet. It has not been in evidence and there have been no expressions of gratitude from people on the back benches opposite to the Front Benches below them, or at any rate I have not heard them. The truth is that this Budget has done nothing but harm to small businesses, and the only proposals to help them have come from this side of the Committee.
If the Government want to give this kind of assistance from the Budget they can do so as the result of my proposed new Clause. If the Parliamentary Secretary is interested in the position of small companies let him wait until about 2 o'clock or 3 o'clock tomorrow morning and accept the new Clause which some of my hon. and right hon. Friends have tabled about the exemption limits for Profits Tax.
The Parliamentary Secretary went on to say that we could not distinguish in legislation between industry and industry. Really, I am taken aback by his having the audacity to raise that argument. Think of the hours that were spent on the Conservative benches last year pleading for special treatment for shipbuilding, particularly.

Mr. Gaitskell: And for fuel efficiency.

Mr. Crosland: Yes, and the hon. Member for Kidderminster—

Mr. Nabarro: Hon. Gentlemen opposite would probably concede that a good case was made out and was supported from all parts of the Committee last year for a special dispensation for fuel efficiency equipment in industry, because it would yield a greater revenue to the


Treasury over a span of years and would contribute directly to an increase in the exports of coal.

Mr. Crosland: I agree with that and, from the layman's point of view, I was extremely sympathetic to everything that the hon. Gentleman was trying to do on fuel efficiency; but it is not a question of revenue. It is a question of the Parliamentary Secretary's argument that we cannot distinguish between industry and industry in legislation. He obviously has not read the Millard Tucker Report. Think of the cinema industry, the shipping industry, the steel industry—

Mr. Gaitskell: And agriculture.

Mr. Crosland: There is, of course, no difficulty about distinguishing between industry and industry from the point of view of legislation. That argument was not up to the Parliamentary Secretary's normal standard.
Apart from the Parliamentary Secretary, it is generally admitted that the concession in the proposed new Clause would be of assistance to small companies, that it would be of more assistance to them than to large companies, and that small companies will suffer more than large companies from the new credit policy pursued by the Government. Those three general statements, which I do not think can be challenged, I should have thought constituted a very good case indeed—one that was not rebutted by the Parliamentary Secretary—for accepting the proposed new Clause.
The Parliamentary Secretary concluded with one point which, on the face of it, was more plausible than the remainder of the points in his speech. He said that if the proposed Clause had any purpose at all it must be to increase the capital expenditure of the small companies, and that my right hon. Friend's argument about there being no increase in the inflationary pressure from loss of revenue must be wrong. We admit that. We want to increase the capital expenditure of small companies, but we quite realise that in the circumstances of the defence programme and because of the necessity for exporting a larger volume of engineering goods, the total level of investment should not be increased over the. limit which the Chancellor has set.
We recognise that, but we are very concerned lest the effect of the tighter

credit policy may not be to depress the amount of investment by small firms relative to the amount of investment by large firms. We have a suspicion that this is the effect of restricting investment not by controls, but by the use of the monetary weapon. We have put forward the new Clause to redress that balance. We would rather a little more investment were done by small firms and a little less by the larger firms.
This is a serious proposal. It may be inadequately drafted and capable of improvement. The Parliamentary Secretary knows the difficulty of drafting very complicated Amendments when in Opposition and without the advantage of expert guidance. If the Parliamentary Secretary had given any sort of adequate answer, or had shown himself sympathetic in the slightest degree, I daresay we should have been satisfied. Speaking for myself, I remain totally dissatisfied with the answer we have had.

Mr. Frederic Harris: Surely the figure £50 million given by the Parliamentary Secretary is fantastic. I wonder whether the Treasury officials took the normal depreciation allowances into account. I cannot see how the figure, on ordinary reckoning, can be anything like £50 million. The Parliamentary Secretary was rather put off by the size of the figure from giving any concession whatever, even a partial concession. Can he enlarge upon that figure?

Mr. Gaitskell: Are we to have no kind of answer from the Parliamentary Secretary? He made a totally inadequate speech and there has been a most devastating reply from my hon. Friend the Member for Gloucestershire. South (Mr. Crosland). I should have thought pride alone would induce him to rise and try to make some effort to deal with it.

Mr. Maudling: The arguments adduced by the hon. Member for Gloucestershire, South (Mr. Crosland) had already been answered in the speech I made. The figure of £50 million—in answer to the question of my hon. Friend the Member for Croydon, North (Mr. F. Harris)—is a net figure, of the actual cost of the proposal. If the proposed Clause were passed, every company would be entitled to benefit to the extent of £1,600 a year. and that works out at £50 million net cost.

Mr. Albu: We have listened to the Parliamentary Secretary's reply. He spent three-quarters of his speech repeating exactly the argument which I put to the Committee. My hon. Friend the Member for Gloucestershire, South (Mr. Crosland) has pointed out that they were the arguments that my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) put to the Committee last year. When he came to the relevant point, the hon. Gentleman made no concession. If he had made the slightest approach to us by saying that he would look at the proposal

to see whether anything could be done it might be different, but in view of the fact that he made no approach at all, and of the present Government's credit policy, there is nothing we can do but to press this matter to a Division. I ask my hon. and right hon. Friends to follow me into the Lobby.

Question put, "That the Clause be read a Second time."

The Committee divided: Ayes, 198; Noes, 219.

Division No. 149.]
AYES
[5.7 p.m.


Acland, Sir Richard
Griffiths, Rt. Hon. James (Llanelly)
Morgan, Dr. H. B. W.


Adams, Richard
Grimond, J.
Morley, R.


Albu, A. H.
Hale, Leslie (Oldham, W.)
Morris, Percy (Swansea, W.)


Allen, Arthur (Bosworth)
Hall, Rt. Hon. Glenvil (Colne Valley)
Morrison, Rt. Hon. H. (Lewisham, S.)


Anderson, Frank (Whitehaven)
Hall, John (Gateshead, W.)
Mort, D. L.


Attlee, Rt. Hon. C. R.
Hamilton, W. W.
Moyle, A.


Awbery, S. S.
Hannan, W.
Mulley, F. W.


Balfour, A.
Hardy, E. A.
Neal, Harold (Bolsover)


Barnes, Rt. Hon. A. J
Hargreaves, A.
Oldfield, W. H.


Bartley, P.
Harrison, J. (Nottingham, E.)
Oliver, G. H.


Bence, C. R.
Hastings, S.
Oswald, T.


Benson, G
Hayman, F. H.
Paling, Rt. Hon. W. (Dearne Valley;


Bevan, Rt. Hon. A.(Ebbw Vale)
Healy, Cahir (Fermanagh)
Pannell, Charles


Bing, G. H. C.
Henderson, Rt. Hon. A. (Rowley Regis)
Paton, J.


Blackburn, F.
Herbison, Miss M.
Plummer, Sir Leslie


Blenkinsop, A.
Hewitson, Capt. M
Price, Joseph T. (Westhoughton)


Blyton, W. R.
Holman, P.
Pryde, D. J


Boardman, H.
Holmes, Horace (Hemsworth)
Reeves, J.


Bowen, E. R.
Hoy, J. H.
Reid, Thomas (Swindon)


Bowles, F. G.
Hubbard, T. F.
Reid, William (Camlachie)


Braddock, Mrs. Elizabeth
Hudson, James (Ealing, N.)
Rhodes, H.


Brockway, A. F.
Hughes, Cledwyn (Anglesey)
Richards, R.


Brook, Dryden (Halifax)
Hughes, Emrys (S. Ayrshire)
Roberts, Albert (Normanton)


Broughton, Dr. A. D. D.
Hughes, Hector (Aberdeen, N.)
Rogers, George (Kensington, N)


Brown, Thomas (Ince)
Hynd, H. (Accrington)
Schofield, S. (Barnsley)


Butler, Herbert (Hackney, S.)
Hynd, J. B. (Attercliffe)
Shinwell, Rt. Hon E.


Callaghan, L. J.
Irving, W. J. (Wood Green)
Short, E. W.


Carmichael, J.
Isaacs, Rt. Hon. G. A.
Shurmer, P. L. E


Castle, Mrs. B. A.
Janner, B.
Silverman, Sydney (Nelson)


Champion, A. J.
Jay, Rt. Hon. D. P. T.
Simmons, C. J. (Brierley Hill)


Chapman, W. D
Jeger, Dr. Santo (St. Pancras, S.)
Slater, J.


Clunie, J.
Jenkins, R. H. (Stetchford)
Sorensen, R. W.


Cocks, F. S.
Johnson, James (Rugby)
Soskice, Rt. Hon Sir Frank


Coldrick, W.
Jones, David (Hartlepool)
Sparks, J. A.


Collick, P. H.
Jones, Jack (Rotherham)
Stewart, Michael (Fulham, E.)


Craddock, George (Bradford, S.)
Keenan, W.
Stokes, Rt. Hon. R. R.


Crosland, C. A. R.
Kenyon, C.
Strachey, Rt Hon. J.


Cullen, Mrs. A.
Key, Rt. Hon. C W.
Strauss, Rt. Hon. George (Vauxhall)


Daines, P.
King, Dr. H. M.
Summerskill, Rt. Hon. E.


Dalton, Rt. Hon. H.
Kinley, J.
Sylvester, G. O


Davies, Ernest (Enfield, E.)
Lee, Frederick (Newton)
Taylor, Bernard (Mansfield)


Davies, Harold (Leek)
Lever, Leslie (Ardwick)
Taylor, John (West Lothian)


Davies, Stephen (Merthyr)
Lewis, Arthur
Taylor, Rt. Hon. Robert (Morpeth)


Deer, G.
Lindgren, G. S
Thomas, David (Aberdare)


Dodds, N. N.
Lipton, Lt.-Col. M.
Thomas, Ivor Owen (Wrekin)


Driberg, T. E. N.
Logan, D. G
Thorneycroft, Harry (Clayton)


Edwards, W. J. (Stepney)
MacColl, J. E.
Thurtle, Ernest


Evans, Albert (Islington, S.W.)
McGhee, H. G.
Timmons, J


Evans, Edward (Lowestoft)
McInnes, J.
Tomney, F.


Ewart, R.
McKay, John (Wallsend)
Turner-Samuels, M


Fernyhough, E.
McLeavy, F.
Ungoed-Thomas, Sir Lynn


Field, W. J.
MacMillan, M. K. (Western Isles)
Viant, S. P.


Fienburgh, W.
MacPherson, Malcolm (Stirling)
Wallace, H. W


Fletcher, Eric (Islington, E.)
Mainwaring, W. H.
Watkins, T E.


Forman, J. C.
Mallalieu, J. P. W. (Huddersfield, E.)
Webb, Rt. Hon. M. (Bradford, C.)


Fraser, Thomas (Hamilton)
Mann, Mrs. Jean
Wells, Percy (Faversham)


Freeman, John (Watford)
Manuel, A. C.
White, Mrs. Eirene (E. Flint)


Gaitskell, Rt. Hon. H. T. N.
Marquand, Rt. Hon, H. A.
White, Henry (Derbyshire, N.E.)


Gibson, C. W.
Mayhew, C. P
Whiteley, Rt. Hon. W.


Glanville, James
Messer, F.
Wilkins, W. A.


Greenwood, Anthony (Rossendale)
Mikardo, Ian
Willey, Frederick (Sunderland, N.)


Grenfell, Rt. Hon. D. R.
Mitchison, G. R.
Willey, Octavius (Cleveland)


Grey, C. F.
Monslow, W
Williams, David (Neath)




Williams, Ronald (Wigan)
Winterbottom, Ian (Nottingham, C.)
Younger, Rt. Hon. K.


Williams, W. R. (Droylsden)
Woodburn, Rt. Hon. A.



Williams, W. T. (Hammersmith, S.)
Wyatt, W.L.
TELLERS FOR THE NOES:


Wilson, Rt. Hon Harold (Huyton)
Yates, V.F.
Mr. Pearson and




Mr. Kenneth Robinson.




NOES


Aitken, W. T.
Glyn, Sir Ralph
Nicholson, Godfrey (Farnham)


Allan, R. A. (Paddington, S.)
Godber, J. B.
Nicolson, Nigel (Bournemouth, E.)


Alport, C. J. M.
Gomme-Duncan, Col. A.
Nugent, G. R. H.


Amory, Heathcoat (Tiverton)
Gough, C. F. H
Oakshott, H. D


Arbuthnot, John
Gower, H. R.
Odey, G. W.


Ashton, H. (Chelmsford)
Graham, Sir Fergus
O'Neill, Rt. Hon Sir H. (Antrim, N.)


Assheton, Rt. Hon. R. (Blackburn, W.)
Gridley, Sir Arnold
Ormsby-Gore, Hon. W. D.


Astor, Hon. W. W. (Bucks, Wycombe)
Grimston, Hon. John (St. Albans)
Orr, Capt. L. P. S.


Baker, P. A. D.
Grimston, Sir Robert (Westbury)
Orr-Ewing, Charles Ian (Hendon, N)


Baldock, Lt-Cmdr. J M
Harden, J. R. E.
Osborne, C.


Baldwin, A. E.
Hare, Hon. J. H.
Partridge, E.


Banks, Col. C.
Harris, Frederic (Croydon, N.)
Peake, Rt. Hon. O


Barber, A. P. L.
Harris, Reader (Heston)
Perkins, W. R. D.


Barlow, Sir John
Harrison, Col. J. H. (Eye)
Peto, Brig. C. H. M


Baxter, A. B.
Harvey, Ian (Harrow, E.)
Pickthorn, K. W M


Beach, Maj. Hicks
Harvie-Watt, Sir George
Powell, J. Enoch


Bennett, F. M. (Reading, N.)
Heald, Sir Lionel
Price, Henry (Lewisham, W.)


Bevins, J. R. (Toxteth)
Heath, Edward
Profumo, J. D


Birch, Nigel
Higgs, J. M. C.
Raikes, H. V.


Bishop, F. P.
Hill, Dr. Charles (Luton)
Redmayne, E.


Black, C. W.
Hinchingbrooke, Viscount
Remnant, Hon. P


Bossom, A. C.
Hirst, Geoffrey
Renton, D. L. M.


Boyd-Carpenter, J. A.
Holland-Martin, C. J
Roberts, Peter (Heeley)


Boyle, Sir Edward
Holmes, Sir Stanley (Harwich)
Robertson, Sir David


Brains, B. R.
Hornsby-Smith, Miss M. P
Robinson, Roland (Blackpool, S.)


Braithwaite, Lt.-Cdr. G. (Bristol, N.W.)
Horobin, I. M.
Robson-Brown, W


Bromley-Davenport, Lt.-Col. W. H
Howard, Greville (St. Ives)
Rodgers, John (Sevenoaks)


Brooman-White, R. C.
Hulbert, Wing Cmdr. N. J.
Roper, Sir Harold


Buchan-Hepburn, Rt. Hon. P. G. T.
Hurd, A. R.
Ropner, Col. Sir Leonard


Bullard, D. G.
Hutchison, Lt: Corn. Clark (E'b'rgh W.)
Russell, R. S.


Bullock, Capt. M.
Jenkins, R. C. D. (Dulwich)
Ryder, Capt. R. E. D.


Bullus, Wing Commander E. E.
Jennings, R.
Salter, Rt. Hon. Sir Arthur


Burden, F. F. A.
Johnson, Eric (Blacktey)
Savory, Prof. Sir Douglas


Butcher, H. W.
Johnson, Howard (Kemptown)
Schofield, Lt.-Col. W. (Rochdale)


Butler, Rt. Hon. R. A. (Saffron Walden)
Jones, A. (Hall Green)
Scott, R. Donald


Carr, Robert (Mitcham)
Joynson-Hicks, Hon. L. W
Simon, J. E. S. (Middlesbrough, W)


Carson, Hon. E.
Kaberry, D.
Smithers, Peter (Winchester)


Cary, Sir Robert
Keeling, Sir Edward
Snadden, W. McN.


Channon, H.
Lambert, Hon. G.
Soames, Capt. C.


Clarke, Col. Ralph (East Grinstead)
Lancaster, Col. C. G.
Speir, R. M.


Clarke, Brig. Terence (Portsmouth, W.)
Langford-Holt, J. A.
Spence, H. R. (Aberdeenshire, W.)


Cole, Norman
Law, Rt. Hon. R. K.
Spens, Sir Patrick (Kensington, S.)


Colegate, W. A
Legge-Bourke, Maj. E. A. H
Stevens, G. P.


Craddock, Beresford (Spellhorne)
Legh, P. R. (Petersfield)
Stoddart-Scott, Col. M


Cranborne, Viscount
Lindsay, Martin
Storey, S.


Crookshank, Capt. Rt. Hon. H. F. C.
Linstead, H. N.
Strauss, Henry (Norwich, S.)


Crosthwaite-Eyre, Col. O. E.
Lloyd, Maj. Guy (Renfrew, E.)
Stuart, Rt. Hon. James (Moray)


Crouch, R. F.
Lockwood, LL-Col. J. C.
Studholme, H. G


Crowder, John E. (Finchley)
Longden, Gilbert (Herts, S.W.)
Sutcliffe, H.


Crowder, Petre (Ruislip—Northwood)
Lucas, Sir Jocelyn (Portsmouth, S.)
Taylor, William (Bradford)


Darling, Sir William (Edinburgh, S.)
Lucas, P. B. (Brentford)
Thompson, Kenneth (Walton)


Deedes, W. F.
Lucas-Tooth, Sir Hugh
Thompson, Lt.-Cdr. R. (Croydon, W.)


Digby, S. Wingfield
McAdden, S. J.
Thorneycroft Rt. Hn. Peter (Monmouth)


Dodds-Parker, A. D.
Macdonald, Sir Peter (I. of Wight)
Thornton-Kemsley, Col. C. N.


Donaldson, Cmdr. C E McA
Mackeson, Brig. H. R
Tilney, John


Donner, P. W.
McKibbin, A. J.
Turner, H. F. L


Doughty, C. J. A
McKie, J. H. (Galloway)
Turton, R. H.


Drayson, G. B.
MacLeod, Rt. Hon. lain (Enfield, W.)
Ward, Miss I. (Tynemouth)


Drewe, G.
Macmillan, Rt. Hon. Harold (Bromley)
Waterhouse, Cam Rt. Hon. C.


Duncan, Capt. J. A. L
Macpherson, Maj. Niall (Dumfries)
Watkinson, H. A.


Duthie, W. S.
Maitland, Comdr. J. F. W. (Horncastle)
Webbe, Sir H. (London &amp; Westminster)


Elliot, Rt. Hon. W. E
Maitland, Patrick (Lanark)
Wellwood, W.


Fell, A;
Manningham-Buller, Sir R. E.
White, Baker (Canterbury)


Finlay, Graeme
Markham, Major S. F.
Williams, Rt. Hon. Charles (Torquay)


Fisher, Nigel
Marshall, Sidney (Sutton)
Williams, Gerald (Tonbridge)


Fleetwood-Hesketh, R. F
Maude, Angus
Williams, Sir Herbert (Croydon, E.)


Fletcher-Cooke, C.
Maudling, R.
Williams, R. Dudley (Exeter)


Fort, R.
Maydon, Lt.-Comdr. S. L. C
Wills, G.


Foster, John
Modlicott, Brig. F.
Wilson, Geoffrey (Truro)


Fraser, Hon. Hugh (Stone)
Mellor, Sir John
Wood, Hon. R


Fraser, Sir Ian (Morecambe &amp; Lansdale)
Molson, A. H. E.
York, C.


Gage, C. H.
Monckton, Rt. Hon. Sir Walter



Galbraith, Cmdr. T. D. (Pollok)
Nabarro, G. D. N.
TELLERS FOR THE NOES:


Garner-Evans, E. H.
Nicholls, Harmer
Mr. T. G. D. Galbraith and




Mr. Vosper.

New Clause.—(REVOCATION OF S. 468 OF INCOME TAX ACT, 1952.)

Section four hundred and sixty-eight of the Income Tax Act, 1952 (which relates to the restriction of certain transactions leading to avoidance of income tax or profits tax) shall be deemed not to have been in force as from the introduction of the Bill for this Act into the Commons House of Parliament.—[Mr. Stevens.]

Brought up, and read the First time.

Mr. G. P. Stevens: I beg to move, "That the Clause be read a Second time."

Mr. Eric Fletcher: On a point of order. I ought to draw your attention, Sir Charles, to the fact that although it would appear that my name is on the Order Paper in support of this new Clause, if I have the good fortune to catch your eye, I intend to oppose it. I am sure it is not the fault of my hon. Friend the Member for Bury and Radcliffe (Mr. W. Fletcher), who we all hope will have a quick recovery, that there is this confusion. I thought I ought to make the position clear for the record.

Mr. Stevens: The effect of this Amendment will be to repeal Section 468 of the Income Tax Act, 1952, which was Clause 32 of the Finance Bill introduced by the right hon. Member for Leeds, South (Mr. Gaitskell) last year, which subsequently became Section 36 of the Finance Act, 1951. Briefly, the provisions of Section 468 include the fact that all transactions of certain classes, being classes of transactions which result or may result directly or indirectly in the avoidance of liability to Income Tax or Profits Tax, shall be unlawful unless carried out with the consent of the Treasury.
I ask the Committee to pay particular attention to the words "which result or may result directly or indirectly," because they mean that this Clause is a very wide one. The type of transaction envisaged by that Section is of a company incorporated in this country which transfers its seats of activity overseas. In the event of any person being found liable on conviction and indictment, that person may suffer prison for two years or a fine not exceeding £10,000.
In the last year or two it so happens that natives of West Africa have come to me and have suggested that foreign capital which has gone to their country and has spent some time, capital, plant and

machinery and labour in development raw materials and primary products in that territory has benefited more than the natives of the territory concerned. They have suggested that the indigenous peoples of those countries should impose financial burdens of some sort considerably heavier than are imposed already on the foreign capital which has thus settled upon their soil.
I have given them a word of warning. I have suggested that if they make too arduous the conditions under which foreign capital comes to their country and develops that country, not only to the benefit of the foreign capital concerned but to the benefit of the peoples who live there, that foreign capital will go elsewhere and find somewhere more profitable in which to develop the primary products.
We are in the same way in this country. If one goes along the Great West Road one sees a large number of extremely well built, very light and airy factories, all owned by British companies but with this behind the scenes: that the majority of the share capital—in some cases the whole of it—is owned by Americans resident in the United States of America.
We need American capital and other foreign capital in this country. We need it in the Colonies, and the Dominions need it as well. I know that American friends of mine are perturbed, as we are perturbed in similar cases, where in some cases part and in some cases the whole of profits earned by American capital in this country cannot be remitted to the home country. I wonder whether Section 468 is not the last straw in many cases. American and other foreign capital will come here if there is some freedom to manoeuvre, but it will not come here if, once in, the trap shuts.
So far as the United Kingdom companies are concerned—by that I mean companies which are not only registered in this country, but are owned by British shareholders—it has been a common practice for hundreds of years for companies registered in this country to establish branches, trading posts, shops of one kind and another overseas. Those branches have been operated from this country and, if they have been successful, when they have been firmly established they have been converted by the head office, as it were, in this country, into


limited companies incorporated in accordance with the laws of the country concerned. A local board of directors has been set up, local management has taken the place of management from this country, and no more than shareholders' control has been exercised for the future from here.
That system, for 300 years or more, has been found to be efficient politically, economically and also commercially. In years gone by the East India Company paved the way for that industrial independence without which the political independence of India, whether desirable or not, could never have been achieved. The Charter Company opened up vast tracts of Africa. The Hudson Bay Company laid the foundations of Canada's industrial greatness.
Today, Section 468 of the Income Tax Act, 1952 would look after the Governor and Company of Adventurers of England trading into Hudson Bay. Those adventurers on their return, instead of being lauded and applauded for their courage, determination and enterprise, would each one of them, jointly and severally, be liable to imprisonment for two years or to a £10,000 fine or both.
It is perfectly true that Treasury consent is provided for by the Section. However, I know from experience the very strong arguments which are necessary to convince the Treasury that a decision to transfer the control from this country to a country overseas is really necessary. I must confess that I prefer a judgment coming from the years of practical business experience of a director. I have found that to be more reliable than the theoretical opinions of the Treasury, however expert.
Section 468 is commonly known as the "ring fence" Section, and it seems to me that the words "ring fence" are wholly alien to our ideas of freedom. I hope that the Chancellor, if he will not accept the new Clause, will, at any rate, give us some hope that we may for ever wipe out this stain on our economic escutcheon.

Mr. E. Fletcher: The hon. Member for Langstone (Mr. Stevens) has introduced the new Clause in what, I think, the Committee would regard as very moderate and temperate language, language which, at any rate,

contrasts very markedly with the violent language which was used by a great number of hon. and right hon. Members opposite during the Committee stage of the Finance Bill last year. I do not know whether the hon. Member was then present.

Mr. Stevens: Oh, yes, indeed.

Mr. Fletcher: The hon. Member will remember that we had a very heated debate this time last year when we were discussing what is now Section 468 of the Income Tax Act, 1952, which was regarded by Conservative Members as the notorious Clause 32 of the Finance Bill introduced by the Labour Government last year. On that occasion we were threatened with all kinds of dire consequences if the Clause were allowed to pass and become enacted in the Finance Act and as part of our Income Tax legislation.
In those circumstances, I am not particularly surprised that a number of hon. Members opposite have put down a new Clause seeking to repeal that Section in the Income Tax Act. It will be very interesting to see what attitude the Government adopt towards it. If the speeches which Members opposite made last year have any sincerity whatever, the Government will be bound to accept the new Clause and repeal the old Clause 32. But we have become so accustomed during the last few days to so many Members of the Government eating the words which they spoke a year ago that I have a shrewd suspicion that the Chancellor will not accept the new Clause which his hon. Friends behind him have proposed. [Laughter.] It is not a laughing matter—it is a matter of great seriousness, because the country is deeply interested in understanding whether the speeches made by Conservative politicians have any sincerity at all or whether this is merely another instance of the hollow mockery in which Conservative politicians indulge, and have indulged for a great number of years.

Mr. James Griffiths: They are getting very uneasy now.

Mr. Fletcher: I am anxious that the Committee should examine this matter dispassionately, and I do not think that we can do better than remind ourselves of some of the things that were said by


leading Conservative statesmen last year, when the Clause was opposed.
Their attack on the Clause was led by the present Secretary of State for the Colonies. Fortunately for him, he is not able to take part in our finance debates this year, because he is otherwise engaged. He said of the Clause, which, I am quite sure, the Government will be anxious to retain—that it was pernicious and vicious; that it was
the worst type of Socialist isolationism
and was
poison to an international centre like London." —[OFFICIAL REPORT, 12th June, 1951; Vol. 488, c. 2175, 2177.]
The right hon. Gentleman and his hon. Friends said that it was a confession of despair. If those words, which, I am sure, were meant seriously, were true, then the Chancellor surely will tell us that he is going to repeal that obnoxious Section.
What did the Minister of Works say? He referred to the Clause and to another Clause as "children of oppressive taxation" and as a sign of decay. Then we had the Minister of State predicting all kinds of evil consequences as a result of the Clause.
5.30 p.m.
I do not know whether there is any significance in the fact, but we also had a speech from the Parliamentary Secretary to the Ministry of Civil Aviation, who was here until a moment ago. He indulged in a vitriolic attack on the Clause, and he was followed by the Minister of State for Economic Affairs, whose intermittent appearances we are glad to have this year in our finance debates. [HON. MEMBERS: "Where is he?"] That was one of the occasions in which the right hon. Gentleman, who is generally the most mild mannered of speakers, was provoked to express great misgivings. He was appalled at the prospect that would arise to our economy and to our finances. He thought that the whole of our earnings were so fragile and precarious that if the Clause were put on the Statute Book, a great deal of revenue would be lost.
Looking back, is it not quite obvious that all those speeches by present Ministers, who, either because of those speeches or for some other reason, now adorn the

Treasury Bench, were without any sincerity at all? They were all hollow in their mockery. They knew perfectly well that the Clause was necessary, as it still is, to protect the Revenue and to prevent tax evasion and avoidance. They knew perfectly well that there was no harm in the Clause.
We shall be told by the Chancellor of the Exchequer that the Clause works very well because it is being administered reasonably by the Treasury. But he will not be able to get away with that excuse, because that is exactly what my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) last year told the right hon. Gentleman and his friends would happen. We pointed out, when we were defending the Clause against that attack, that it would be administered reasonably and sensibly by the Treasury, and that when it was right and proper to give the exemptions which the Treasury can give, they would be given; that no honest trading company, either here or overseas, need have the slightest fear that its legitimate business interests would be in any way affected or prejudiced by the Clause when it reached the Statute Book.
That is why it was put on the Statute Book, and it has been administered reasonably. The Chancellor, therefore, will not be able to say that it is because of his administration that the Clause is justified. If he were to say that, he would be contradicting what the Secretary of State for the Colonies said last year when he said that, however it was administered, its mere existence was a menace. If the Chancellor agrees with that, he will have to accept the new Clause.

The Chancellor of the Exchequer (Mr. R. A. Butler): Would the hon. Member give us the benefit of his own views? We are all fully aware of the HANSARD and other speeches to which he has referred, but we are very much longing to hear his own observations.

Mr. J. Griffiths: The right hon. Gentleman is entitled to a bit of his own.

Mr. Fletcher: My views and those of my hon. Friends are precisely the same as last year. We regard Section 468 as a good and necessary Section. We rejoice that it was put on the Statute Book.
It was designed to protect the Revenue and to prevent measures of tax avoidance. It was necessary for that purpose, and we take pride in the fact that it was put on the Statute Book, despite all the vehemence, anger and opposition, however engendered, of hon. Members opposite.
What I hope we shall hear now, either from the Chancellor, from the Financial Secretary or from the Minister of State for Economic Affairs—

Mr. Griffiths: He is here at long last.

Mr. Fletcher: —who took such an interest in the Clause last year and opposed it so strongly, with language which was for him so vehement, that they now quite candidly admit that their opposition last year was entirely false, misjudged and miscalculated, and that the Clause was rightly put on the Statute Book, that it is being wisely administered, and that it ought to remain on the Statute Book.

Mr. Ian Horobin: I do not propose to occupy the Committee's time for long with this matter, but it is one of very great importance and we should not leave this year's Finance Bill without some discussion on it. The Clause relates to the iron curtain which the country set round itself last year. It is well known that England and Russia are the two countries in Europe which have advanced so far in social progress that they require these iron curtains around them to prevent their nationals from fleeing.

Mr. C. R. Hobson: That is clever.

Mr. Horobin: No, it is not clever—it is tragic. That iron curtain Section is one with which, neither last year nor now, the Front Bench will have any sympathy. The reasons why it was found necessary to bring in something of this sort—or, at least, that it was claimed to be necessary —are well known. Primarily, those reasons are the crushing and intolerable burden of taxation upon business enterprises.
I do not know whether every Member of the Committee observed the significance of a figure which was given a few moments ago by the Parliamentary Secretary to the Ministry of Civil Aviation,

when discussing a previous new Clause. He said, merely in passing, that a change in the method of depreciating valuations would cost £300 million a year.
The true significance of that figure is that if our currency had not been subject to the inflationary debauchment of recent years, it would not matter which method of depreciation was allowed. That figure of £300 million, therefore, is a measure of the extent to which the inflation which we have recently suffered has been depleting the real capital of British industry. That came out simply in passing.
I do not need to weary the Committee with a long examination of the fact that for the first time in British industrial and commercial history, British firms, as patriotic as the next, have had to begin to feel, "Has it become quite intolerable'? Must I go if I can?" That is a really serious situation, and I do not believe that sensible people, on either side of the Committee, could view a concern where that was true with anything but grave misgivings.
I am willing to make allowances to hon. and right hon. Gentlemen opposite for sincerity, which they are not always willing to extend to us. I do not believe that anybody in the Committee can be happy in a commercial situation when it has been, apparently, found necessary to introduce measures of this sort, contrary to the whole history of the country, when anybody who could do his business in London and in sterling has not done it. It is as a symptom of the depreciation. the deterioration, in our commercial supremacy that Section 468 of the Income Tax Act is so dangerous. If it had no effect whatever, it is serving notice on the world that we no longer have confidence in ourselves; and nothing could be worse than that.
I do not wish to develop the general argument. I could have quoted from a most powerful speech by the present Colonial Secretary last year. which has been developed briefly by my hon. Friend the Member for Langstone (Mr. Stevens), who introduced the new Clause. I do not want to go into the general arguments, but I want to suggest that this matter has now, which it did not have last year, a direct relevance to a fundamental decision of policy which the right hon. Gentleman made, and which we all look to see redeemed as


soon as possible: to put sterling back on a convertible basis.
I am one of those who was most encouraged to see the Chancellor adding the enormous weight of his authority to this view. I do not believe there is any future—I am sure there is no future—for the system of private enterprise in this country unless, quickly, we can make sterling convertible. That runs through the whole of our problems—the Liverpool Cotton Exchange; putting the meat industry back into proper hands, and what have you. The whole future of this country and of private enterprise is wrapped up with convertibility.
The section of the Act which we are seeking to annul serves notice that at present convertibility is impracticable. Clearly, if we are in a position —whoever's fault it is, or if it is nobody's fault—in which we find that if they get the chance large industries and commercial undertakings will transfer their transactions abroad, it is obvious that it will be impossible, by any Bank rate policy or any other measure that the Chancellor can take, to make sterling convertible. That is a self-evident proposition, and I do not think it will be disputed by anyone.
But that is a reason which is new since last year, apart from all the other general arguments, why this section should be repealed, and that we should be again in a position to say to our customers in effect, "Come, and come as you please, because we know that under those circumstances you will come and stay." But, having said that I must say that I do not believe it would be fair for hon. Members on this side of the Committee, who feel as strongly as I do about this, to press the Chancellor at this moment to say he will repeal this here and now—[HON. MEMBERS:"Oh!"] Hon. Members opposite had better be quiet, they may draw some of the fire on themselves—[HON. MEMBERS:"Oh!"] Their scarlet, financial sins are irredeemable—[HON. MEMBERS:"Cheer up!"]—and at 2 1½2 per cent at that.
The Chancellor has inherited a terrible problem, and over the next six months while we are getting over the hump of this crisis, I do not honestly think that he can give anything away. He must probably cling to every protection he has,

at a moment when anybody who opens his newspaper or looks at the tape knows that sterling is balanced on a knife edge. That again should not be a matter of dispute between us.
I do not think, therefore, that it would be reasonable for hon. Members on this side of the Committee to press the Chancellor too far. If he feels he can do it now, bless him; let him get on with it. But I do not think it would be reasonable to press the Chancellor too far in the immediate future. He is trying, and trying successfully so far as the foreign exchange is any test— and in my opinion it is the only test in the next month or two— to preserve sterling and to moderate the balance of payments. Therefore, for my part, I would not press him to go further than he feels he can at present.
I do hope however, and I feel confident, that when he replies my right hon. Friend, so far from watering down any criticisms made on this Clause, will reaffirm them. If he wants any help in suggesting powerful terms in which to do it, I shall be grateful to lend my small assistance to him; not to water down his objections, but to re-affirm them, and to say that as soon as he has sufficiently restored our position from the terrible mess in which he found it, he will cast this Section into the oblivion from which it never need have appeared, had it not been for the past six years of profligacy from which we are still suffering.

5.45 p.m.

Mr. Roy Jenkins: The hon. Member for Oldham, East (Mr. Horobin), whose speeches throughout on the subject of this Bill we have followed consistently and with great interest—though sometimes with a little trepidation—now seems to have got himself into, and to be offering to the Chancellor, a very happy and logical position. At least, it is a very happy position: but I am not sure whether it is logical. He invites the Chancellor to say that everything which was said about this Section of the Income Tax Act when it was Clause 32 of the Finance Bill last year was quite justified and that the Section is absolutely disastrous in its effects, and at the same time he invites the Chancellor to continue to operate it.

Mr. Horobin: As the hon. Member has asked for it, surely even he must


have listened from time to time to the Members of his own Front Bench who have been pointing out that at the time of the last Budget we were actually in credit in foreign payments. There is a slight difference between that position and the unfortunate position in which the present Chancellor finds himself.

Mr. Jenkins: In the first place this is a matter of tax evasion or avoidance, and not primarily of foreign exchange, but in any case none of my right hon. and hon. Friends have ever put themselves into the position of believing that this country has not consistently been passing through a difficult foreign exchange position. That was certainly the view of my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) when he introduced his Budget last year.
I think hon. Members opposite now begin to realise some of those facts about our foreign exchange position. It is clear from the history of the years since the war that sometimes we get into a rather easier situation, but we are constantly—and will continue to be— faced with an underlying situation which is very difficult indeed and which will continue so for some time.
The hon. Member for Oldham, East was, in parts of his speech, rather more moderate in manner than on previous occasions. Hon. Members who have not heard him on previous occasions may be surprised to hear that. But if he was more moderate in manner, I think he was more extreme in substance than I have ever heard even him before. He made several main points. First he took up the point about historical and replacement costs, and a remark made by the Parliamentary Secretary to the Ministry of Civil Aviation that £300 million would be involved in changing from one to the other. This, he thought, showed that for the first time in our history British capital is being depleted. This, he said, had never happened before and does not this show the disastrous position in which we are?
If we are to be told that because there has been a change in the value of money over the last 12 years the whole of British industry is ruined from a productive point of view in a way it has never been before, then we are in a most extraordinary state of affairs. Money has been losing value for about 800 years, and I do not believe

that British capital has been depleted during that period or that our productive machine has been run down.
We are also told that we are in an absolutely disastrous position economically unless we are able to ensure that this country is just as attractive to capital from a fiscal and every point of view as any other country. That is the argument of the hon. Member for Oldham, East. I say that if that is his view, then everything which people like his right hon. Friend the Chancellor of the Exchequer say about the carrying out of our defence programme and the maintenance of our social service structure is absolute nonsense.
There is no conceivable chance of carrying on this defence programme, or even without the defence programme, of carrying the burden of our National Debt and maintaining our social services at anything like their present level, unless we are to have a level of corporate taxation a good deal higher than that of many other countries in the world. That is the plain and simple fact, and anybody who believes the propaganda put out by the Tory Party about our social services. must know it is absolutely ridiculous.
Therefore, if it is necessary to prevent capital going abroad we should not be afraid of a provision of this sort. I thought my hon. Friend the Member for Islington, East (Mr. Fletcher) went a little far when he said that there was great rejoicing when this was brought in. I would not join in that. It is a Clause which is open to some objection. but the alternative to great numbers of companies deliberately transferring their seats of control and great flights of capital— owned as the hon. Member for Oldham, East rather inconsequentially said, by patriotic citizens— going out of the country solely in order to escape the weight of taxation which other people have to face is far worse than the introduction of this Clause.

Mr. Horobin: It is difficult to answer something so fantastic without having to enter into a sort of competition. Has the hon. Gentleman not read the newspapers in recent years and seen the sort of things which have been happening in other countries once the inhabitants of those countries woke up to the fact that they were being mulcted of enormous


sums, not for taxation or for the benefit of all the inhabitants of the country, but for the comparatively well off people? Has he not heard of the Anglo-Iranian oil trouble? Is it not possible that the same thing may happen in Rhodesia?

Mr. Jenkins: Is the hon. Gentleman suggesting that the Anglo-Iranian oil trouble would not have happened, but for Section 32 of last year's Finance Bill?

Mr. Horobin: I am not suggesting anything of the sort. I am not even suggesting that the difficulty would not have arisen if we had had a different Foreign Secretary. I am only saying it all helps.

Mr. Jenkins: I am not now sure where the hon. Member for Oldham, East wants capital to go. He has painted such a horrible picture of the fiscal conditions in this country and the political conditions of other countries that it is difficult to know where capital can go. [HON. MEMBERS: "To Oldham."] I am afraid Oldham comes in the category of places which are fiscally uninhabitable.
I do not know what attitude the Chancellor will take to this new Clause. From certain expressions which we have seen flitting across his face, I would judge that he perhaps will not be very sympathetic towards it. I do not know how his hon. Friends will react to that. They did use extremely strong language on a previous occasion last year. In fact, as my hon. Friend the Member for Islington, East said, it was Members of the present Government who used the strongest language of all. We heard from the present Secretary of State for the Colonies. but he has fled the country, in spite of this Section. He has gone away. But there are a lot of other people. There was the Minister of Works, and the Minister of State for Economic Affairs, who always times his entries into this Chamber so exceedingly well. I cannot help feeling that if the Chancellor does not relent on this he will have a great revolt on the benches behind him. But if he gets into trouble I and my hon. Friends will come with him into the Lobby to help him defeat his own back benchers.

Mr. R. A. Butler: I do not think I need to be taught my relations with my hon. Friends behind me by the hon. Member

for Stechford (Mr. Roy Jenkins). I think it is always dangerous to interfere— particularly as the hon. Member does so frequently— in the affairs of a family. They know how to run their own affairs.
I sympathise with the hon. Member for Langstone (Mr. Stevens) who very tersely moved his new Clause. I know that my right hon. and hon. Friends, including the Secretary of State for the Colonies— who, as the Committee knows, is away on duty, carrying out his duties overseas— all feel very strongly on this matter. They feel that control over the migration of companies is doubtful in principle and damaging to many companies. There is a good deal to be said quite sincerely for these arguments.
I will take up the remark of my hon. Friend the Member for Oldham, East (Mr. Horobin), who suggested we should not repeal this section here and now. I think that is the right decision and it is a pleasure, in the concluding stages of this Bill, to congratulate the hon. Member for Oldham, East on his wisdom and moderation. On a previous occasion he said I had straw in my hair. I am obliged to him for pulling it out and for putting a laurel wreath on my brow. It is now, "Roses, roses all the way" and the straw has blown away.
That is a very satisfactory atmosphere in which to enter into one or two serious observations which I wish to make about the operation of this Section which caused so much interest last year First I wish to ask whether this Section which has now been consolidated in the consolidation of Income Tax law is causing damage to industry or to the general national interest. I want to make some observations of a constructive character about its future operation so if any hon. Members wish to make any observations they will know what I have had to say. I hope that after that we may make some progress. There is a great deal of work to do, and it is the firm intention of the Government that the Committee stage shall be finished tonight. I think that, in all reason, we can finish it fairly easily.
Looking at the question whether the Section is operating, I have here the latest figures of the applications granted and the applications refused. Over 300 applications under the Section have been settled and granted and, so far, in only two cases has Treasury consent been finally refused. I do not think that those


figures give colour to any suggestion that there is any serious interference with legitimate business transactions. Nor do I think that it can be described under the circumstances, if 300 firms or units get under the Iron Curtain, as being either a ring fence or an Iron Curtain.
I think it shows in what a benign and enlightened spirit the Section has been administered, at any rate under the present Administration. I would say further that my predecessor, under severe pressure from our side of the Committee in last year's Finance Bill, conceded on 12th June, 1951, that full weight would be given in the administration to the desirability of encouraging developments in the Colonies, and that the Section would not be administered solely on Revenue reasons.
That indicates the value of the pressure exerted by my hon. and right hon. Friends last year. They helped to bring about this desirable result which was consumated by the decision of the electorate to have a change of Administration and to put into office those who really understood these matters, with the result that my right hon. and hon. Friends really have not very much to worry about, or not as much as they might have had otherwise.

Lieut.-Colonel Marcus Lipton: Might I interrupt before the right hon. Gentleman gets to the really humorous part of his speech? He has referred to 300 companies. Could he give some indication of the amount of capital transfer involved?

Mr. Butler: I am afraid that I have not got that with me. That is as far as I can go. Some of these concerns were, however, small. The general impression is that the Section is being administered according to the spirit expressed in the Committee last year.
I should also like to say that, as far as I know, and I made inquiries before coming to the Committee this afternoon, no conviction at the cost of £2,000 or of imprisonment has taken place. There have been no convictions. I give an undertaking to the Committee that, both in this matter and in the general operation, I will watch carefully how the Section is administered in future, in the following spirit. I want, in administering this Section, to avoid the risk that many com-

panies operating overseas will be tempted to take advantage of any laxity or repeal to remove their control abroad for inadequate reasons.
At the same time, I think that we ought to avoid an autarchic or ring fence economic policy in this country which does not encourage that spirit of liberty towards which we are aiming and which was referred to by the hon. Member for Oldham, East. I also remember, in the moving words of the hon. Member for Langstone, how this country made its reputation through the merchant venturers who chanced their arm overseas and who enhanced not only their own credit but also the honour of this country.
I am informed that were there to be greater laxity there would be a great risk to the Revenue. Very high figures have been mentioned to me. It is impossible to give an exact computation, but figures between £50million and £100 million might be involved. I do not say that that is the case, but that is the opinion which has been given to me. If we take as our guide the spirit I have suggested, namely, that we do not encourage companies to go abroad without adequate reason but yet we do permit the cases which are legitimate, we should then be doing our duty.
6.0 p.m.
Let me describe for a moment how things are operating at present. Any case in which the Inland Revenue and the Treasury reach the prima facie conclusion that Treasury consent ought to be refused is referred to the advisory panel under the chairmanship of Lord Kennet. The panel's advice is before me when I reach my final decision on the particular case. The terms of reference given to the panel were announced by my predecessor, and they remain in being.
This means that the Committee weigh carefully considerations put forward by the. interest concerned against the prospective loss of Revenue or foreign exchange if the transfer were permitted. They then inform me whether on balance of considerations it would in their opinion be in the national interest that permission should be granted. So far as they go, and judging by the resultant successes—300 applications and only two refusals—these terms of reference seem to be working satisfactorily.
I wish, however, to offer three comments on their interpretation, not because I think that Lord Kennet and his colleagues are in any doubt on the matter but because I am anxious to remove any suspicion, especially on the part of my hon. Friends who have raised this matter, that the terms of reference are being interpreted in an unduly restrictive manner.

Mr. Glenvil Hall: Would the right hon. Gentleman say whether all the cases go to him? In every instance did the whole 300 go to him? Do the applications go to him only if it is thought proper that he should give a decision on selected cases?

Mr. Butler: They come to me only in case of doubt which has to be finally decided. Most of them are decided easily. They do not form the subject of upset, controversy or doubt. Therefore, I have not seen many cases, except those about which there has been grave doubt.

Mr. Hall: Only two out of 300 cases have been refused. Does that mean that only two came to the right hon. Gentleman or did others come to him and did he decide in favour of them?

Mr. Butler: No. I have seen more than two cases, but I do not remember more than a few in which there was a question of grave doubt. I thought that it was my duty, being interested in the administration, to see what was happening. For that reason, I have seen more than two or three cases which have been difficult. I thought that it was my duty to see how the matter was being operated. Normally they would not necessarily come to me unless they were difficult.
My first comment is that there may be a feeling in the minds of my hon. Friends and in the Committee that the terms of reference are weighted unduly in favour of the Revenue and dismiss too lightly the interests of the applicant company. My comment on that is that the advisory panel should take into account all the necessary considerations affecting both the public interest and the interest of the applicants. I am sure that the panel already works in that spirit, but I should like to make the point clear.
Secondly, I regard it as a strong point in favour of an application if the transaction for which consent is asked relates to the setting up of a new business

activity, or the substantial expansion of an existing activity. Again, the Section has been, and I hope will be, so administered in practice.
The third comment I have to make is that in considering these applications it is most important to keep in the forefront of our minds the great importance of colonial development, and indeed of development in the Commonwealth generally. An assurance was given by my predecessor that this would be done. but I think that in the interests of the panel and of all of us, it would be a good thing if I repeated that assurance.
I turn from the terms of reference to the consents. I have been considering whether anything could be added to the consents which are already known and which are already in operation. Let me give an example. Individual applications are not necessary in the case of a company controlled by non-residents which was set up after the passing of the Section. In such a case, the company is perfectly free to remove its control from the United Kingdom at any time.
I propose to issue two new general consents Their precise terms will be announced shortly, but I will give their outline to the Committee. I propose, first, that individual applications for Treasury consent shall be dispensed with where it is proposed to form a new subsidiary company in some part of the Commonwealth or the Colonies for the purpose of starting a new industrial activity there. This will make it still clearer that development will not be hampered in the Commonwealth or the Colonies, which I think we all believe to be the right thing.
The second new general consent relates to bona fide sales of land— such as a tea or rubber estate— for full consideration to an entirely independent purchaser. About one-third of the applications received by the Treasury relate to transactions of this nature, and consent is given to them as a matter of course in straightforward cases. This will clear up the matter and simplify the administration in the cases of transfer of land, which we find is the normal application under the administration of the Section at present.
There really is no point in putting the taxpayer to the trouble of making application in cases of this sort where consent


is practically automatic. That is as far as I can go at present. As the hon. Member for Oldham, East, has said, the repeal of the Section, or any completely altered conception of it, would involve us perhaps in serious difficulties at an exceptional time. We are moving in an exceptional period. I am grateful to those hon. Members who have drawn attention to that.
I think that what I have said will indicate to the Committee that we intend to interpret this Section in a thoroughly common sense way. Meanwhile, I give the further assurance that I will keep the operation of the Section under close review. I hope that my hon. Friends will realise by the spirit in which I have approached this matter that we have deliberately taken a great deal of trouble to try to make this Section work in the best possible way.

Sir Frank Soskice: We are all anxious to make progress in the consideration of this Bill, and I do not think that I should be assisting in the deliberations of the Committee if I intervened at any length. I intervene only to say that we emphatically believe that the provision we introduced as Section 32 of last year's Finance Act is still necessary.
The right hon. Gentleman the Chancellor of the Exchequer grasped at the only straw that was held out to him by the hon. Member for Oldham, East (Mr. Horobin) in saying that he did not want the Section repealed this year. We think that this Section should be part of our tax legislation so long as there is a need for it to prevent a serious loss of Revenue. I understand that the Chancellor has been advised that if there were a more lax administration it would be possible that there might be an annual loss of Revenue of between £ 50 million and £ 100 million. I should have thought that that was sufficient justification for this Section.
We are glad to hear that the administration of the Section has turned out to be satisfactory, that the advisory panel under the chairmanship of Lord Kennet has been working well, and that no difficulty has been experienced in the administration of Section 468 of the consolidated Income Tax Act, 1952. As the Chancellor's predecessor, my right hon. Friend intimated that it was the intention

of the last Government that the Section should be administered in just that spirit. The whole point was that the Treasury consent was to be given where common sense required that it should be given.
The primary object of the Clause was fiscal. It was necessary because, if it were not made part of our tax code, there was a danger, as the Chancellor of the Exchequer has now been advised and as we were advised, of a really serious loss of Revenue. It was essential in these circumstances that some steps should be taken to prevent that loss occurring. That risk, apparently, still exists, and so it is necessary that the safeguard should still be retained.
The Chancellor said that he will see to it that the administration of the Clause is kept under review, and that he will watch its operation. We are glad to hear it; we think it perfectly right and proper and my right hon. Friend would have done exactly the same if we had remained in office. We take note of the fact that Treasury consent is given or withheld not solely with regard to fiscal conditions, but that the general public interest, wider considerations, and the interests of the applicants are also taken into account and given full weight. We have also taken note of the two new circumstances in which the Chancellor proposes that consents should be given without the necessity of a formal application made by the company requiring to transfer its residence abroad.
The Chancellor mentioned two new cases— the case where subsidiary companies were to be set up, and the case of bona fide sales of land. The only question which I would put to him, and to which I think I can anticipate his answer will be in the affirmative, is that I presume that he has satisfied himself, after consultation with his advisers, that no opportunity for tax evasion is presented through the medium of constituting subsidiary companies overseas in circumstances in which consent should be given without an application.

Mr. R. A. Butler: We have taken all that into account.

Sir F. Soskice: I am much obliged to the right hon. Gentleman. I had assumed that he had done so, and that it was only after that that he had decided that consent should be given in that class of case.
We feel that the debate and what the Chancellor himself has said has amply justified the action of the former Government in introducing this matter into our tax code. Its obvious necessity has been clearly demonstrated, and it is clear that the Chancellor rejects the rather irresponsible appeals made to him by some of his hon. Friends to dispense with this necessary and essential safeguard to our fiscal system. I hope he will have the courage to retain it for so long as, in the public interest, he believes it necessary to do so.

Sir John Mellor: It is quite clear that the Chancellor has endeavoured to be helpful in this matter, and I am sure that the Committee welcomes the trouble that he has taken to inform himself of the position, but I must say, after listening to him very carefully, that I am puzzled and find it difficult to understand why it is really necessary to maintain these restrictions in force.
After all, these restrictions, through delay, expense and uncertainty, may well prevent the desirable movement of companies abroad. The restrictions are very elaborate, and companies must go to considerable trouble to find out their position. If they wish to make an application, inevitably, it must take up a lot of time, and, in the course of that time, an opportunity may be lost. Therefore, I think it is necessary for the Chancellor to have a very strong reason for continuing these restrictions at all.
He has told us today that he has been advised that the immediate removal of these restrictions might cause a loss to the revenue of some £50 million or £100 million a year, but I confess that I did not think that he passed on that advice to the Committee with any great confidence that it was anything like accurate. I do not think he feels at all sure that these figures are in any way reliable, and it would seem to me that they are not reliable at all.
My right hon. Friend told us that, of the applications made, 300 have been accepted and only two refused. Surely, if that is the situation, it is rather hard to imagine how, if the restrictions had been completely removed, the result would have been so great as to cause a

loss of revenue to this country of between £50 and £100 million a year. Therefore, it would seem to me that these figures ought to be disregarded, and that we ought to have regard only to what is quite certain— that out of 300 applications, only two have been refused.
Accordingly, I would ask if it is really worth while keeping on these elaborate restrictions, which must involve delay to the companies in deciding their course of business, and must have caused them the loss of valuable opportunities, of which, in their interest and in the interests of the trade of this country, they should have taken advantage at the earliest opportunity. I hope the Chancellor will say a word or two more on that point.
My right hon. Friend, obviously, has thought the matter over with very great care, but that is the one point on which he failed to convince me— that the country really cannot afford to dispense with these restrictions now. I hope he will say something more on that point, because I am still open to conviction, and I hope he will convince me.

6.15 p.m.

Sir Edward Boyle: I should like to join my hon. Friend the Member for Sutton Cold-field (Sir J. Mellor) in thanking the Chancellor for the very full reply which he has given. Considering the amount of work on many subjects which a Chancellor has to do, I think all of us must appreciate the trouble which he obviously takes over individual matters in this Bill.
I rise only because I want to reply to the very fair point which was put earlier by the hon. Member for Islington, East (Mr. E. Fletcher). I was one of those who both voted and spoke against Clause 32 last year; but when I spoke against that Clause, for the reasons which my hon. Friend the Member for Langstone (Mr. Stevens) has so clearly summarised, I had no doubt that it would be very much easier to place it on the Statute Book than to take it off again. So long as the rate of taxation on industry remains at its present level, it is going to be an extremely hazardous business to remove this Clause from the Statute Book.
No one of my hon. Friends last year would have denied that the former Chancellor had a case for this Clause. After


all, he was stepping up the gross rate of taxation on distributed profits from 30 per cent, to 50 per cent., and he had been warned by many people who were in a position to know that it might lead to a large number of companies seeking foreign registration. There was an obvious case for the Clause, although my hon. Friends, as I believe, rightly, considered that there was a greater weight of argument on the other side.
Today, the whole position is different. We have a very grave foreign exchange position, while certain fresh burdens have been imposed on industry. In these circumstances, I suggest that the presumption today is against removing this Clause from the Statute Book. I think it would be impossible for the Chancellor to do so, and that the only course which it would be reasonable to expect him to follow is that he should administer it in as fair a way as he possibly can. After listening to his reply, I for my part feel that, in so far as it can be administered justly, it will be, so long as my right hon Friend is in charge.

Mr. Glenvil Hall: Before the Chancellor replies to his hon. Friends, could he tell us how much revenue was involved in the 300 cases of companies which have been allowed to transfer overseas? Is the loss of revenue very much, very little or negligible?

Mr. R. A. Butler: I did say that many of the concerns were small companies, and that they related to transfers of land and tea estates and that sort of thing. I have not got the exact figures with me, and so I cannot give the right hon. Gentleman an exact estimate.
In answer to my hon. Friend the Member for Sutton Coldfield (Sir J. Mellor), all I can say is that I think these new consents will make it quite obvious to companies that they will not have particular difficulty, because in some cases applications will not be necessary, and. where application is necessary, we shall see that it does not lead to undue delay. I do not think that, in the way we are doing it, there need be undue delay for British companies in commerce and industry.
In relation to the estimate which I tried to give, I did not make it more specific, because I think it is impossible to give an exact statement. If I had made it too

high, it would have looked as if I was afraid the British companies which were well suited to do the job at home, would go overseas, and, if I made it too low, I might have given a wrong impression of the advice that came to me in the past year or two about likely intentions I only gave an approximate figure, because these figures can be misleading. In doing it in the way in which we are doing it now, my hon. Friends need not fear that there will not be liberty of action to companies which genuinely fulfil the considerations which I have laid down.

Mr. Stevens: On behalf of my hon. Friends on this side of the Committee, I welcome these two special concessions which the Chancellor has announced in regard to the promotion of subsidiaries overseas and bona fide sales of land. I should also like to say how very pleased I was to learn that the blood of the 17th century merchant adventurers courses so enthusiastically through the veins of Treasury officials.
I think these figures of 300 to 2 which the Chancellor has quoted—if only somebody could have got odds like those on the Derby today, they would have been very happy—are most satisfactory and far higher than we expected them to be. On those grounds, I was about to ask the leave of the Committee to withdraw the Motion, but, before doing so, may I say that I personally look forward to the time when foreign capital will come here and domestic capital be retained here on a voluntary basis, without any compulsory measures being necessary at all. I beg to ask leave to withdraw the Motion.

Motion, and Clause. by leave. withdrawn.

New Clause.—(MAINTENANCE OF PROPERTY.)

(1) For the purpose of section one hundred and one of the Income Tax Act, 1952 (which grants relief in respect of maintenance, repairs, insurance and management of property), a person occupying any premises or having any interest therein as lessee or tenant thereof shall be treated as if he were the owner thereof if, under the covenants or stipulations contained in the lease or agreement by virtue of which he occupies or has such interest in the premises, the whole of the burden of repairing the premises falls upon him.

(2) The provisions of this section shall have effect from and after the fifth day of April, nineteen hundred and fifty-two, and accordingly subsection (1) of section three hundred and fourteen of the Income Tax Act, 1952, shall be read as if the words "or, in the case of


expenditure by a tenant, could, if he had been the owner"" were omitted.—[Viscount Hinchingbrooke.]

Brought up, and read the First time.

Viscount Hinchingbrooke: I beg to move,"That the Clause be read a Second time."
This Clause has moderately respectable antecedents. It was first introduced on the Committee stage of the 1946 Finance Bill, and repeated on the Report stage, and it was again introduced in the Committee stage of the 1947 Bill. These are quite good vintage years, and I rather hope that the Committee will consider this Clause to be full-bodied and palatable.
It certainly had some powerful support when it was introduced for the second time in 1947. Then, Sir John Anderson, now Lord Waverley, with his great experience as Chancellor of the Exchequer, spoke in its favour, and one or two of my right hon. Friends were also good enough to give it their support.
The object of the Clause is to give tenants on repairing leases the same rights as owners to reclaim from the revenue on the maintenance, repair, insurance and management of their property. On the earlier occasions, I declared a personal interest in this matter, and I do so again. I inhabit that type of house, and I am myself in the particular class of persons whom this Clause will advantage.
The position of such tenants today is this. Schedule A tax is payable by the tenant but it is deducted from the rent. In fact, the owner pays the tax. Since the tenant does not actually pay the tax, he is precluded from claiming against the revenue for the costs of repair. Likewise the owner, although he pays the tax, is precluded from claiming because he does not carry out the repairs.
We have the extraordinary situation that these tenants with repairing leases are not able to repair their properties and claim against the Revenue to the extent that many other persons can. I have no doubt whatever that property in this class is tending to fall into disrepair in comparison with properties managed by their owners and by tenants with long leases. One only has to go around London and the countryside to see certain classes of property of this sort standing at a relative disadvan-

tage in appearance compared with others, particularly in the agricultural world.
There is no doubt that in the last few years the State has gone to extreme limits to aid the position of owners of property of all sorts in keeping their properties up to date and in good condition, whereas this class to which I have referred has been allowed to remain depressed. It is, in fact, twice as expensive for tenants in this class to repair their houses with Income Tax standing at 9s. 6d. in the pound. Many of them, under enforcement provisions relating to local byelaws or the terms of their lease, have to carry out periodical painting operations on their houses and have to repair their dwellings, perhaps in expensive matters like drainage, and they have to do that out of their net income. I believe that at a time of national shortage of houses there ought to be no discrimination between the classes of houses as regards repairs. All houses capable of repair should be repaired, and all should receive the equivalent financial assistance from the State.
I should like to read a few sentences from a speech that I made on the 1946 Finance Bill because the words there are as compressed as any that I can possibly find now to explain the situation. I said:
The law has hitherto generally held— I say 'generally held' because two inroads, to which I will refer in a moment, have been made into it in recent years— that the Income Tax Acts only grant maintenance relief against tax levied in respect of the property, and also, and this is what is important, where it is borne by the person who maintains the property. … I suggest to the House that Parliament has already recognised that this is a bad principle in two respects, by two separate pieces of legislation… First of all, the Finance Act, 1940"…
that is the Finance (2) Act—
provided that tenants with a lease of over 50 years were to be treated as if they were owners, and, apart altogether from what was the class of property or what was the relation between the rent and Schedule A, these tenants were enabled to put in a full maintenance claim on the ordinary statutory repairs, in exactly the same way as owners.
That is the first inroad into the practice. The second inroad is with regard to the Income Tax Act, 1945, Section 32, which is now Section 101 of the new Income Tax Act, 1952. This
provided that the relief which the owner of agricultural property can obtain is not to be restricted to the Schedule A Tax, but can be allowed against other sources of income. That piece of legislation"—


and I want to impress this upon the Committee—
vitiates the principle that a tenant cannot get relief because he does not bear tax in respect of the property."—[OFFICIAL REPORT. 15th July, 1946 Vol. 425, c. 916.]
6.30 p.m.
The right hon. and learned Member for Neepsend (Sir F. Soskice) was put up, or put himself up, to answer me both in 1946 and 1947. I do not know what answer we shall get today from his opposite number. Deep calls to deep, and Solicitor-General to Solicitor-General, and both of them are apt to be the dutiful representatives of those dark and reactionary forces that inhabit that palatial mansion down the river. The right hon. and learned Member for Neepsend has shifted his ground twice in defending the position of the Inland Revenue. In 1946 he said that a tenant with a beneficial interest— that is to say, a tenant who pays less in rent than the Schedule A value— was already in the position of a landlord in that he could claim for maintenance up to the extent of his beneficial interest and that, therefore, nothing could be done to him.
That, of course, is a fact, but it does not follow that nothing could be done to him, because it seems to me that tenants with a beneficial interest and tenants without a beneficial interest are already in extraordinary positions of relative advantage and disadvantage. For instance, a man who pays a rent of £1 on a Schedule A value of £300 can claim up to £299 in repairs from the Inland Revenue, but a man who pays in rent what is practically the Schedule A value can claim next to nothing at all.
It must be quite common to have a situation in a certain street with two identical houses inhabited by two people with identical incomes, both of them with repairing leases. One may have a beneficial interest and one may not. The man with a greater beneficial interest has a start of 29s. 6d. over the other man for every£1 he spends on repairs— that is to say, £1 in rent and 9s. 6d. which he gets back from the Inland Revenue. That is unfair as between tenants, and, worst of all, it is bad luck upon the house and the repairs to that house tenanted by a man without a beneficial interest.
The right hon. and learned Gentleman also said in the same year that a tenant

without a beneficial interest would have his rent adjusted downwards to take account of the fact that he does the repairs himself. But surely it is idle to suppose that rents are adjusted downwards to take account of repairs. Who makes any sort of calculations when leases are drawn up? What happens with a lease of 49 years when, after say the first 10 years, the cost of repairs has risen two or three times what it was at the beginning of the lease? So far as I know, nobody has been able to break a lease and negotiate a new lease with any hope of that factor being taken into account. All the nice suppositions on that leg of the argument made by the right hon. and learned Gentleman seem to me to be thrown out of gear by the fact that since he used that argument the cost of repairs has risen by 20 per cent. or 30 per cent.
In 1947 the right hon. and learned Gentleman, as the spokesman of the Inland Revenue, entirely changed his ground. He did not refer to his previous argument at all, because I think he saw the futility of it. He recognised, perhaps, for the first time, that he was faced with the fact that capital allowances are now given to agricultural tenants and landlords alike and that no differentiation is made. He perhaps realised that he was faced with the fact that tenants with leases over 50 years are given maintenance relief by the Finance Act, 1940, and perhaps he realised that tenants with leases under 50 years can claim for repairs to the extent of their beneficial interest.
At any rate, he changed his ground completely. One can only suppose that those who instructed him made a mad rush to stop the breach. What they said, through the right hon. and learned Gentleman, was that this concession for which I am asking could never be given because if it was given all rent would qualify as a deduction against income. I really must quote what the right hon. and learned Gentleman said because it seems to me that the Inland Revenue are really carrying the argument to absurdity, and I was always taught at school that if the defence floundered in absurdity that proved conclusively that the original proposition was correct.
The right hon. and learned Gentleman quitted altogether the field of repairs, house ownership and tenancy, and


charged into a different field altogether. He said:
… if you are going to say with regard to a tenant on a short lease that he must be allowed to treat his repairs as a deduction against his general income, as can a tenant on a long lease, you are in effect saying that all rent should qualify as a deduction against general income or as against profits. If you say that, what logical distinction can you draw between rent and any number of other personal payments? Take the case of keeping one's family—one cannot use that as a deduction against one's profits or income, one has to pay that out of one's net income … If you can treat the rent you pay for your private premises as a deduction, logically you can draw no distinction between that sort of payment for your personal needs and any other payment for the upkeep of your family, for the education of children, or any other personal payments you may make."—[OFFICIAL REPORT, 16th June, 1947; Vol. 438. c. 1705.]
I should have thought that that amply proved the proposition. Nobody has Ever suggested that rents should be constituted a statutory deduction from income. Rents are quite different from repairs. The whole field of repairs is covered at the present time, except this very narrow one, and there is every case in justice, in the common experience of all of us with regard to these houses, that that gap should be completely closed.
One big heave by the Committee tonight, and perhaps we shall be able to carry this reform against the Inland Revenue. But if my hon. and learned Friend the Solicitor-General, in the stress of the debate in this last stage of the Bill, does not feel that he can give a concession, I do plead with him, in view of the arguments that have been used, that he will promise that some action between now and next year will be taken by the Treasury and the Inland Revenue to give this matter a thorough-going review. If they cannot make up their minds to swallow this principle, will they not get it remitted to the Royal Commission on Profits and Income so that it can be given that meticulous examination which my hon. Friends and I have so long demanded?

The Solicitor-General (Sir Reginald Manningham-Buller): I think it might be convenient to the Committee if I answered my noble Friend at this stage. This may have the advantage of enabling the matter to be further elucidated or it may perhaps shorten the discussion.
My noble Friend, in moving this Clause, has advanced his argument with his usual eloquence and force. I think he has developed his argument with remarkable ingenuity. By endeavouring to answer the speeches made by the right hon. and learned Member for Neepsend (Sir F. Soskice), my predecessor, he has sought to make it difficult for me to advance the same arguments on this occasion. He also sought to drive a wedge between Solicitors-General, but that is a very difficult operation, as I can assure him; and I am afraid that he will probably find my speech as disappointing and unsatisfying as he found that of my predecessor.
This Clause is slightly more extensive in its scope then the one my noble Friend put forward in 1946 and 1947. The previous Clause gave relief only to a tenant occupying on a full repairing lease. This Clause not only purports to cover such a tenant, but will also—so it is worded—cover a lessee under a full repairing lease who has sub-let the premises without covenanting with the sub-lessee to repair.
Let me, in passing, deal with that particular instance. I would say to my noble Friend that if the lessee under a repairing covenant has sub-let at a profit then he is allowed relief in respect of the cost of maintenance and repairs, etc., as a deduction from his liability to tax on the rent he has received from his sub-tenant. Therefore, it does not seem to me that there is really any need to make any particular provision for the tenant who has sub-let without a covenant to repair.
What did rather surprise me in my noble Friend's speech was that he did not endeavour to meet the point—and I think it is a substantial and a difficult point—advanced on the previous occasions by my predecessor in replying to his proposals in 1946 and 1947. One really cannot ignore, as my noble Friend suggested one should, the fact that a tenant who agrees to enter into a lease—a full repairing lease —will, because he is accepting an obligation to execute all the repairs, normally be able to secure a lower rent than he would if the landlord were liable for all the repairs and the tenant liable for none. I am sure that my noble Friend must recognise that that must be so, whatever the general levels of rent may be, however the general levels rise or fall. The tenant who accepts an obligation to


execute repairs will normally secure a tenancy at a lower rate than a tenant who leaves the landlord to execute repairs.
If that is so—and I believe it is—the tenant who is undertaking the obligation to do repairs is really saying this—is he not'?—to his landlord, "I will undertake to pay the repairs, whatever they may cost, to the premises you are going to let me occupy, and, as I am undertaking that, I will pay you, and you ought to accept, a lower rent than if you were taking that obligation upon yourself."
If that is the right way that this should be looked at—and I believe it is—and it may be a good bargain for the tenant or a bad one, depending upon the condition of the premises and the extent of the liability to repair—if that is the right way to look at this, surely one is driven to this conclusion, that the acceptance of liability by a tenant on a full repairing lease is an acceptance of an obligation in lieu of a payment of a higher rent, and whatever he pays on repairs is, although it is paid on repairs, equivalent to the payment of an extra rent.
If that is right then it does mean that one must have regard, in considering this new Clause, not only to the tenant under the full repairing lease, but the tenant whose landlord is liable to do repairs. This Clause gives no benefit or relief whatever to the tenant whose landlord is under an obligation to repair. It does mean that if we give a relief to the tenant who is under the obligation to do full repairs, and make no provision for the tenant who pays only rent, then we are creating, as I see it, a serious anomaly.
The tenant who is not doing repairs is paying a higher rent to his landlord to do those repairs, and we could, as I see it—and my noble Friend did not endeavour to meet this point—avoid that anomaly arising only if we gave the same tax relief in respect of rent to the tenant who is not under a repairing covenant. Once we do that we are giving tax relief in respect of an item of personal expenditure. We are making a breach in principle, and it would be difficult to know where to draw the line, and it is because of that anomaly that I must tell my noble Friend that it is not possible for the Government to accept his Clause today.
6.45 p.m.
However, I should like just to remind the Committee of what is the position now under the law as it now stands with regard to tax relief in respect of the maintenance and repair of property. So far as business premises and agricultural land are concerned, the trader or farmer deducts maintenance and the cost of repairs as a business expense in computing profits for Income Tax purposes—as, indeed, he can deduct rent. So there is no need to make further provision in that case. where the owner of property gets relief for expenditure in five years that exceeds that allowed for repairs allowance.
For that purpose the word "owner" is given a particular definition. It includes the tenant under a long lease— the ground lessee: for that purpose it is a lease of over 50 years. It also includes a tenant under a short lease who has had a beneficial interest and who pays the whole or part of Schedule A because he lives rent free or pays a rent less than Schedule A and the result is that a tenant or lessee, like a freeholder, can claim relief in so far as he pays tax on the property.
The Income Tax Acts have always maintained as a general principle, apart from one apparent exception to which I shall refer in a moment, that maintenance relief is given only against Schedule A tax on property. The one departure from that is in relation to agricultural property, and there it was decided as a matter of policy that maintenance relief should be given and could be given against income other than income of the property concerned. That alteration was part of a general plan for assisting productive industry, including agriculture. It was a deliberate act of policy—contained in Section 101 of the 1952 Act—rather in the application of the principles of Schedule D than of creating a new Schedule A relief.
That is the present position of the law. As I have told my noble Friend, we cannot accept his new Clause in view of the serious difficulty that it would be bound to create in contrasting the position of the tenant who is paying full rent and who is not liable to repairs, and that of the tenant who is under a full repairing lease. I have advanced such reasons as I can. I am sure that my noble Friend will see a remarkable similarity between them and the reasons advanced by my predecessor.


I hope on this occasion to have the support of my predecessor if he speaks in the course of the debate. If he does not preserve the unanimity between Law Officers I may have an opportunity of reminding him of a speech which he made recently, but I fear that that opportunity will not arise today.
My noble Friend asked for an assurance that the question would be reviewed. I understand that the Royal Commission is reviewing the operation and scope of Schedule A. I do not know when their labours will be completed, and I can give no assurance about that, but I feel sure that in their general review of the whole operation of Schedule A they will pay attention to the speeches which my noble Friend has made in support of this proposal on more than one occasion.

Sir F. Soskice: I should not have intervened in the debate and caused further time to be spent on this matter but for the fact that the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) referred to me personally. I intervene only to say that, having listened to the clear and forceful argument of the Solicitor-General, I find it altogether and completely convincing. I thought it was exactly the argument which I had advanced, but it was better put than I put it, and I am grateful to the hon. and learned Gentleman for putting in such elegant and complete form what I had, obviously, to judge by the impression left on the mind of the noble Lord, put in rather a fragmentary and inconsistent form in the speeches which I made.
I should have thought that the Solicitor-General was obviously perfectly right in his analysis of the situation. He dealt with the long-term lessee, who for the purpose of deductions, is under Section 17 of the Finance (No. 2) Act, 1940, treated as the owner. He then dealt with the situation of the short-term lessee who is entitled to make his deductions to the extent that he is, as the Solicitor-General describes him, a beneficial owner.
With regard to the short-term lessee on a full repairing covenant, I must confess that I thought the Solicitor-General was perfectly right in saying that really the amount he pays by way of what is, in effect, extra rent stands on exactly the same footing as any other personal expenditure, and if one gives relief in those

circumstances one would be involved in giving relief in respect of a pure rental payment. The Solicitor-General's argument seemed to me to be a complete answer to the case put forward by the noble Lord.
I am glad to hear that, as one had anticipated would be the case, this problem, together with so many other problems which arise under the Income Tax code, will be reviewed in due course by the appropriate committee which is going into these matters, or may be going into them.

The Solicitor-General: It is a Royal Commission.

Sir F. Soskice: I understood the Solicitor-General to say that what I have been saying was his information.

The Solicitor-General: I said that I understood they were considering the whole of Schedule A.

Sir F. Soskice: This is a problem which arises under Schedule A, and no doubt the Royal Commission will take this within their purview as they will all other analogous problems. I cannot now usefully add anything, except to thank the Solicitor-General for putting in such a cogent form that which I should have liked to put into words similar to his.

Mr. Ralph Assheton: Unlike my noble Friend the Member for Dorset, South (Viscount Hinchingbrooke), I have not a personal interest in this matter because I happen to live in the kind of house to which the Clause does not apply, but when I hear two Law Officers on opposite sides "ganging up" as they have been doing this afternoon I begin to be suspicious.
I should like to say a word on behalf of the tenants who, I think, are receiving a bad deal out of this. I see the logic of both arguments which have been put forward. The former Solicitor-General put his arguments very well on two previous occasions in my hearing, and my hon. and learned Friend has done the same. From the Revenue point of view, these are very good arguments, because the Revenue always has to say to itself, "What will be the next thing? Where will this lead?"
My noble Friend put his finger on the real point when he said it is rather bad luck on the house which happens to be


occupied by a man who is not in a position properly to maintain it. There may be two houses in the same road, one of which is maintained out of taxed income and the other out of untaxed income, and it is likely that the one maintained out of untaxed income will be better maintained than the other.
The argument of the Solicitor-General was that a tenant taking a house with an obligation to repair would pay a lower rent than he would otherwise pay. That is true, and there may, therefore, be some argument as to who ought to receive the relief, whether it should be the landlord or the tenant, but if relief is to be given in the respect of the repairing of houses, why should it be denied in the case of one house when it is given in another? I am glad to hear that the Royal Commission will put their minds to this matter, and I am certain they will find some commonsense solution of a problem which seems to puzzle Solicitors-General and Inland Revenue alike.

Mr. Angus Maude: After the proceedings of the mutual admiration society between Solicitors-General to which we have listened I should hesitate to drive any further the wedge which my noble Friend the Member for Dorset, South (Viscount Hinchingbrooke) is accused of driving. I hope, too, that I shall not be considered unduly unfair if I ask my hon. and learned Friend how it came about that after listening to the arguments of the right hon. and learned Gentleman the Member for Neepsend (Sir F. Soskice) in 1947 he so far forgot himself as to vote in favour of my noble Friend's new Clause on that occasion. It seems to me that the arguments cannot have been as convincing then as they have been found to be today.
I found the arguments of my hon. and learned Friend convincing up to a point, but, as my noble Friend said, when he got to the point which the right hon. and learned Member for Neepsend had dealt with five years ago about the logical process of extending the relief to all forms of rent if the new Clause were accepted, I found it impossible to follow him. There is no doubt that we have here a position in which some people doing repairs obtain relief and others doing repairs do not obtain relief.
Had we an overwhelming number of houses, if there was a free market in

houses and if there was plenty of accommodation, I could well see that the rent adjustments might be made and could operate freely, but my contention is that in present circumstances they do not so operate. For one thing, the demand for houses, flats and even agricultural property is so great that tenants will pay a far higher rent in many cases where the property is not rent-controlled than they would otherwise do.
Further, there is no doubt at all that the operation of the Rent Restriction Acts in conjunction with the very high cost of repairs at present means both that landlords are not unduly hard about the enforcement of covenants to repair and that tenants are less than willing to go to the limit to which they might have to go if action were taken. The result of those two things in conjunction is that fewer repairs are being done to properties than would be done were some tax relief available.
It seems, to me that in present circumstances, when the operation of the Rent Restriction Acts is meaningless, when the stock of houses in this country is deteriorating rapidly, and has been deteriorating for many years, we ought to do nothing to make that situation worse and we ought in fact to make a concession which will enable properties to be kept in proper repair.
Since a Government which professed to dislike landlords persisted on two separate occasions in retaining a discrimination in favour of the landlord compared with the tenant, I hope that now a Government which has always believed in encouraging the ownership of property will prove to be a little more favourably disposed towards the Clause.

7.0 p.m.

Mr. Gerald Williams: The Solicitor-General put up some clever arguments and I am not going to pit my legal skill, which is nil, against his. He says that the real argument is that a lower rent is obtained from the tenant who does not repair his house. I am sure that is so in many cases, but not in all cases. Let us take the example of two new houses that are let. Both the tenants when taking over the tenancy will say, "There will not be any repairs for many years to come." It is possible that both may pay the same rent, but maybe in


30 or 40 years' time these repairs will have become very crippling.
I also want to impress on the Solicitor-General, as did my right hon. Friend the Member for Blackburn, West (Mr. Assheton), that there is a principle about this. The Government want houses to be repaired. They want them to be in good order, and they go so far as to allow Schedule A concessions to be extended to agricultural property beyond the actual amount of Schedule A assessment, which shows how keen they are that houses shall be properly looked after. If there is no maintenance payment for the tenant, it becomes a crippling job for him and, in some cases, almost impossible. I would go further and say that in some cases it might be unsanitary where the issue of the repair of drains arises. That is not the sort of thing which the Government want to see at the present time.
The principle of keeping houses in good repair should be the first aim of the Government when the housing situation is so bad, because if they are not kept in repair they will be condemned all the sooner, and the Minister of Housing and Local Government will be hit by it, as will the Chancellor of the Exchequer, because Schedule A will cease to come in for those houses. The rates will also stop going to the local authorities.
I want particularly to put a question to the Solicitor-General. I am wondering whether, under the present system, it is not encouraging a certain amount of law breaking. Would it be possible for the landlord to do the repairs when the tenant has a repairing lease and then get a cheque from the tenant to cover those repairs? That may be done on the quiet now, and as the law stands it is certainly encouraging people to break it.
I also want to mention one other case which hon. Members have in mind and that is the case of smallholdings. It is usual in the case of farms for the landlord to do the repairs but in some smallholdings the smallholder himself has to do those repairs. In many cases he is unable to get his maintenance claim, with the result that he has to cut down on something else such as putting fertilisers on his land, which will have an almost

disastrous effect. I ask the Solicitor-General to bear in mind what has been said this afternoon, and I am glad that several hon. Members on this side of the Committee have talked on this subject in view of the fact that my hon. and learned Friend has stated that he expects it will be considered by the Commission which will be reporting before long.

Mr. Horobin: On the matter of pure economic theory of rent both hon. and learned Gentlemen are right, but if their argument is to be taken as final then they are convicted out of their own mouths, because there is then no case for giving any exception even to the long lease. There is not an argument for attendance even for a 2,000-year repairing lease, and that shows what is the real issue before the Committee. In fact, such great changes have taken place in the cost of repairs and in the rates of taxation even within the period of these comparatively short leases, that serious damage is being done because repairs to houses which ought to take place are not being carried out.
That is the real issue between the two. Both are right in pure theory, and in normal circumstances there is no support for what was said by the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke). But today what was always seen to be necessary for a very long lease is surely in a matter of practice now necessary for a much shorter lease. We want to get the repairs done to these houses, but I personally do not think that this new Clause is necessarily the right way to do it. It is a very urgent problem, and I hope that some alternative method for doing it will be found, and that these difficulties will be adequately covered.

The Solicitor-General: I should like to say a word in reply to those who spoke after I addressed the Committee. I am delighted to hear that for once I have been right on a pure economic theory, but it is right also that the long leaseholder is more like the owner of the property. My hon. Friends behind me have drawn attention to the state of certain houses. I think myself that they are inclined to attach too much importance to the tax position, particularly in regard to tenants who are under full repairing leases and have no beneficial


interest. There appears to be many other factors which have handicapped them in keeping their houses in proper repair. There is the war, the difficulty about getting repairing and building licences, and perhaps even the fact of the Leasehold Property (Temporary Provisions) Act as well as many other factors.
I think it would be wrong to suggest that the tax laws were causing difficulty, and I can only repeat what I have said already that we cannot at the moment accept this Clause. The Royal Commission is sitting and I have no doubt they will have regard to what has been said in the course of this debate. It may be that they will find some solution to the problem to which I referred, and to which the noble Lord the Member for Dorset, South (Viscount Hinchingbrooke) in his speech was not able to find any answer. The Royal Commission is engaged in considering Schedule A, and having received the assurance which I have given that it will consider this matter, I hope that my noble Friend will be able to withdraw his new Clause.

Viscount Hinchingbrooke: I am disappointed at the attitude of my hon. and learned Friend. He directs our attention to the fact that a Royal Commission is sitting and he says he feels confident, which means that he is not confident at all, that they will observe the debate and take a note of what has been said. He has not even gone so far as to say he will send a remit to the Royal Commission drawing attention to the disquiet of Parliament—because I think it amounts to that. There have been three years of discussion now and large numbers of Members dislike the present system. If my hon. and learned Friend had been good enough to say that the Government would despatch particulars of this business to the Royal Commission and ask it to give attention to it, then I think I might have been inclined to withdraw my Motion.
It is a matter for some disquiet. It emerges after three years of debates in this Committee that the Inland Revenue, maintaining powerfully and, in some ways cogently, a certain situation, have had that situation defended by successive Solicitor-Generals in the House of Commons. First of all, it was defended by the right hon. and learned Gentleman

the Member for Neepsend (Sir F. Soskice), supported by the Whips of the Socialist Party, and the proposals put forward then were defeated. Then on our side of the Committee, the Solicitor-General, my hon. and learned Friend, has obeyed the instructions of the Inland Revenue and the whips are cracked to get Members to withdraw their Amendments or Motions or allow them to be negatived. Yet it remains true that the representatives of the people sitting on these benches cannot get the law amended to suit the conditions of the time.

Mr. C. R. Hobson: The noble Lord should try it in the Lobby.

Viscount Hinchingbrooke: Hon. Gentlemen opposite are, I can quite see, dismayed by the revelation of the position, by those who have spoken today and on previous occasions. It is a minor matter, but it brings out most clearly that in our present working circumstances in Parliament, where we find the situation that Parliament wants to establish a reform, we are met by the hierarchical apparatus of the State and we cannot go further. I do not want to keep the Committee any longer on this as we must pass to other topics, but I had hoped that my hon. and learned Friend would have considered giving some instruction to the Royal Commission. I trust he will do so, but I do not think his assurances have gone far enough to allow me to withdraw the Clause.

Question put, and negatived.

New Clause.—(EXEMPTION FROM DEATH DUTIES.)

Any money given or bequeathed wholly for the repair or reconstruction of places of worship of any denomination shall be exempt from death duties.—[Mr. Wood.]

Brought up, and read the First time.

Mr. Richard Wood: I beg to move, "That the Clause be read a Second time."
The names which stand at the head of the proposed new Clause are not quite so distinguished as those which stood at the head of it last year. It is worded in identical terms, but last year it was moved by my right hon. Friend the Leader of the House. It is interesting to recall that when he moved it he said:
I do not think a proposal of this kind … would either cost the Treasury very much or


harm any of the ordinary sound principles of taxation.
On the other hand, I am quite satisfied that it would go a long way towards helping in the difficulties of those who have the responsibility of looking after places of worship of every denomination."—[OFFICIAL, REPORT, 19th June, 1951; Vol. 489, c. 300.]
I was most encouraged by those words to hope that the present Chancellor, or the Financial Secretary to the Treasury who is going to reply, and whose personal sympathies with this object are very well known, might find some means this evening of helping in this direction.
There is not very much that I can add to the eloquence and the persuasion which my right hon. Friend the Leader of the House used in moving the Second Reading of this new Clause last year. It seems to me that the arguments he used in 1951 are just as compelling in 1952, if not more so, and that they will continue to be more and more compelling as the problem grows in the years to come. It is worth remembering that on that occasion we had a typical, trenchant and forceful contribution from my hon. Friend the Member for Carlton (Mr. Pickthorn), who is now the Parliamentary Secretary to the Ministry of Education.
The then Chancellor of the Exchequer, the right hon. Member for Leeds, South (Mr. Gaitskell), had to harden his heart and to make the point that he did not think he could single out the repair or reconstruction of places of worship as a particularly charitable object; but he continued, and added these words:
We all feel that this is a worthy cause and I am prepared, where there is evidence of serious difficulty, to see whether there is any way in which we would be justified, as a community, and as the Government representing the community, in doing something to help."—[OFFICIAL REPORT, 19th June, 1951; Vol. 489, c. 305.]
I hope that in the year which has passed between then and now the Treasury have been able to think along those lines and to find some means by which to accede to this very reasonable request.
I hope that the Financial Secretary to the Treasury will not use the argument of the then Chancellor last year that we cannot distinguish between various objects. It is obviously common knowledge that the State does very often distinguish between more desirable and less

desirable objects. It favours, for instance, earned income to unearned income, agricultural land to land used for other purposes, and insurance and national savings against other forms of saving. There are plenty of distinctions which the State makes in favouring one kind of income or property to another.
7.15 p.m.
I believe this case to be particularly strong. We agree that the State must bear some of the responsibility for the immensity of this problem. The proposed new Clause would not have been put down either last year or this year but for the enforced postponement of repairs ever since 1939. That decision resulted in the lack of licences granted to the churches to make repairs. However necessary we may think that decision was—we probably all agree that it was necessary—it was taken by the State. Churches and other places of worship have suffered by reason of that State decision.
In the next 10 years,£4 million will be needed to overcome this situation and to overtake the arrears of repairs which are outstanding. Every hon. Member knows what failure to get that £4 million will mean. I am very doubtful whether, however hard the churches try to raise the money, it will be possible to raise it, unless the churches are given some relief, either by the proposal in the new Clause or in some other way.
My right hon. Friend the Leader of the House expressed doubts last year whether the new Clause he had moved was the way to deal with the problem. I certainly would express my own doubts about it this year. There may be other ways to appeal to the Treasury, and by which the Financial Secretary might deal with it. It might be possible to allow a taxpayer to deduct from his income for the computation of Surtax any money which he had requested for this charitable purpose under a covenant. A second means might be that contributions by business firms for the preservation of the local church would be looked at in the same light as contributions toward the local hospital or any other charity of that kind. I realise that I must not pursue this line or I shall be out of order.
All I am suggesting is that there may be other means by which the Government can give help, apart from the one I am suggesting in the proposed new


Clause. I am not asking for an Exchequer grant—although I would remind the Financial Secretary that after the Great Fire of London in the 17th century the rebuilt Wren churches—I believe I am right in saying—were financed out of a tax which the Government of the day put on coal. We are not trying to establish a new principle.
I am seeking rather more limited help than was given by the Government of the day in the 17th century, but the principle seems similar. We represent the people of this country and it seems patently obvious that the people of this country really want these churches preserved. We have the power, if we so decide, to help in their preservation by giving some relief of this kind. I would remind the Financial Secretary that the help needed by these churches is relatively small and the achievement of stopping these churches from falling down would be enormous. It will be too late to think about these things when the churches have fallen down.

Mr. Raymond Gower: I want to support strongly what has been said so moderately by my hon. Friend the Member for Bridlington (Mr. Wood). Everyone here is aware that the incredible burden of repairing places of worship of all denominations has fallen upon those who seek to sustain this work when they are least able to bear it. Indeed it is a tragedy today that the support to organised religion in this country is declining. But we are still, I sincerely trust, something more than officially a Christian community and we, as the elected representatives of the people, have a high moral duty, as well as a factual one, to seek to influence the Government of today to grant what is only a moderate concession.
The problem is somewhat peculiar in South Wales where my constituency is situated. The Anglican church there is a disestablished body and I can say from personal knowledge that the financial position is far from happy. Recently a special appeal for other purposes was launched, and the burden of maintaining some of the churches in the smaller districts cannot easily be sustained.
Similarly with regard to most of the Nonconformist bodies. In several districts the memberships have maintained by incredible exertions buildings which

were erected at a time when the support, both as regards the numbers of their congregations and finance, was far more than it is today. While in other spheres of life as expenses have increased so have incomes, in this case expenses have increased without any similar increase in their annual income. Like the disestablished churches in South Wales, the Nonconformist chapels and churches are having a most difficult job to maintain their buildings.
I sincerely hope the Financial Secretary will be able to say definitely that assistance will be given through taxation, not by way of grant, and not necessarily on the lines of this Clause, as my hon. Friend said. Where these bodies are so fortunate as to receive some small bequest, such exemption would be of practical assistance at small cost to the Treasury.

Mr. T. Driberg: I am glad to say a few words in support of the new Clause and of the Motion moved so tellingly by an hon. Member who is himself the grandson of a distinguished benefactor of the Church. I hope the Financial Secretary will tell us that Her Majesty's Government will take the same view as they took last year. Last year it was not a new Clause moved by a mere back bencher, but one moved officially by the Opposition, by the present Leader of the House, and the Opposition divided on it. So I hope we may expect a favourable answer from the hon. Gentleman
The hon. Member for Bridlington (Mr. Wood) referred to the Wren churches. Perhaps I might take this opportunity in parenthesis to draw the attention of hon. Members to a White Paper which has crept unobtrusively into the Vote Office in the last few days. It is the Report of the Select Committee on City of London Guild Churches Bill, which will be before this House for discussion perhaps within the next few weeks. As hon. Members will see when they study this document, a fairly elaborate procedure has been found necessary to make possible the very desirable process of rebuilding and restoring these Wren churches which were damaged during the blitz.
There are, however, many other churches all over the country which it is quite impossible to subject to a similar process, but which it is equally desirable


on several grounds to restore. The hon. Member was quite right when he stressed the difficulties of raising the necessary money, and this would seem to be one way of doing it. He was right to say that the State already distinguishes between various more or less desirable objects. I might strengthen his point by saying that similar gifts and bequests to the National Trust are already exempt from Death Duties. The hon. Gentleman will correct me if I am wrong there.
Furthermore, speaking from memory, I think it was in the 1951 Act that similar gifts and bequests were exempt when they were made to the Government direct, to local authorities and to universities. It seems to me reasonable to argue that if gifts and bequests to universities and to the National Trust can be exempt, gifts to churches might be roughly regarded as comparable to those.
I can just conceive that an argument might be put up against this by people who point out that, fortunately or unfortunately—unfortunately as most of us think—the Christian churches in this country command only a small minority of the population now among their active adherents. It might be argued: why, therefore, should the community as a whole subsidise in this or in any other way the beliefs or creed of what is a minority amongst us? I would say to people who put up that argument that it is not only on those grounds that this new Clause has been moved, though it is primarily so.
Churches of various periods in our history are among our foremost architectural treasures. That is true of the mediaeval cathedrals and of these Wren churches to which I have referred. It is true even of some modern churches in what we hope is the evolving architectural style of this century. The architectural heritage which we pass on to posterity would be infinitely poorer if it consisted only of museums, castles, domestic architecture and private houses and did not include churches and cathedrals as well. And yet there is, as has been pointed out, a very serious risk that in the next few years it will become increasingly impossible to raise the money needed to restore and maintain these buildings.
For all these reasons, therefore, I hope very much that we shall get a favourable answer from the Government tonight.

7.30 p.m.

Mr. Assheton: I should like to say how much I agree with my hon. Friend the Member for Bridlington (Mr. Wood), who introduced the Clause, and with what has been said in support of it from other parts of the Committee. There are two or three definite reasons which would justify us in asking the Government to do something to help the churches at the present time.
In the first place, I do not think anybody would deny that the State owes a great deal to the churches. Take education alone: half the schools of the country have been provided for the State by the churches. Look also at the fact that the churches are, as the hon. Member for Maldon (Mr. Driberg) said, a national heritage from the architectural point of view, quite apart from the religious point of view. Some method of helping them must be found.
In the 17th century, after the Great Fire, a way of helping the churches was found. In the 19th century, after the Napoleonic wars, a direct grant was made. I ask the Financial Secretary to see what he can do to help in finding a way now. When I see £20 or £25 million a year being voted for the universities—a very good thing, I have no doubt—I think it is possible that the State might find a little money over the next 10 or 20 years to help to keep our churches in repair.

Mr. E. Fletcher: I should like to add just a few words in support of the Clause and I earnestly hope that in view of the representations that have been made from both sides of the Committee, the Government will feel able to accept the Clause.
As has been made clear in earlier speeches, the Clause is put forward not merely on religious grounds, but can be well sustained on much wider, national grounds. A great many of our churches and cathedrals, for the preservation of which we are pleading, are national monuments. It would be in line with our history and tradition if a Clause on these lines were adopted by the Government. I imagine that most of our great cathedrals owe their existence to benefactions from testators and others, and one doubts whether they would have been built if


Estate Duty had in those days been running at the rate at which it is today.
There is no need whatever to dwell upon the requirement that something should be done to preserve some of these monuments. Hardly a month goes by without one reads in "The Times" or elsewhere an appeal for funds for the preservation of some church of historic value and with historic associations. Reading those appeals in "The Times," one begins to wonder where the funds come from to enable these national memorials to be preserved.
One day it is Lincoln Cathedral. Another day it is Exeter Cathedral. Last year it was the Saxon church at Arreton, in the Isle of Wight. Only a month ago the Prime Minister, as Warden of the Cinque Ports, together with the Archbishop of Canterbury, was appealing for funds to restore the ancient church of Lydd, in Kent. A week ago it was Bosham, renowned because of its representation in the Bayeux tapestries; and so it goes on.
There is no need, therefore, to dwell upon the urgency with which funds should be made available for the preservation of these priceless heritages, to which we owe so much. It is not right that they should be dependent upon the spasmodic response which may result from public appeals, and there may be many worthy objects which do not get supported by the publicity of an appeal sponsored by such eminent names as those I have mentioned.
The case would be met if the Chancellor could adopt some method such as is proposed, which would enable those who are interested in these places, either for religious reasons or on the wider, national grounds, to leave funds for this particularly worthy purpose.

The Financial Secretary to the Treasury (Mr. John Boyd-Carpenter): As my hon. Friend the Member for Bridlington (Mr. Wood) rightly said, I have a good deal of personal sympathy with the objects of his proposal. I think that most of us, on both sides of the Committee, are not only aware of, but equally perturbed by, the financial difficulties with which a good many of the churches are faced today.
It was particularly appropriate that an attempt to assist the churches should be embodied in a Clause which was intro-

duced by an hon. Member whose family for some considerable time back have had a very honourable and illustrious association with the church to which I also happen to belong. My hon. Friend's speech was well in the tradition which one would expect of him.
Under the existing law, gifts for public or charitable purposes—and the purposes set out in the Clause are, of course, in that category—are subject to Estate Duty only if given within 12 months of the death of the donor. This compares with the five years' rule in the case of gifts made not for charitable purposes, with which hon. Members are familiar.
For the general charitable category, therefore, a very substantial concession is made under the existing law. The real difficulty arises when one tries to discriminate further. My hon. Friend the Member for Bridlington and, I think, the hon. Member for Islington, East (Mr. E. Fletcher), both said, and quite rightly, that the State in various financial aspects of its affairs does discriminate between activities in general which it desires to favour, and activities for which it has, perhaps, rather less enthusiasm.
That is broadly true, but the difficulty begins to arise if one tries to stretch that discrimination too far and to press it on to the point of discrimination, as in this case, inside the general category of charitable gifts. That is the real difficulty which my hon. Friend's Clause poses.
If what my hon. Friend has said has force—and, of course, it has considerable force—with relation to the repair of churches, it would surely be argued, by other hon. Members if not by him, that other activities—social work in the crowded quarters of our great cities, the healing of the sick, church missionary activities abroad—all have similar claims to special attention. That is the difficulty which arises when we are confronted, as we are this evening, with a proposal to take one—it is true, highly commendable, highly deserving—category out of the general category of charitable gifts and to confer this exemption.

Mr. Driberg: Would the Financial Secretary deal with the comparison which I tried to make with the National Trust and universities?

Mr. Boyd-Carpenter: Yes, but I prefer to do it later in my speech, at the point at which I have prepared to do it.
There is a further point, which those who are familiar with the somewhat tangled story of the relations between church and State in, for example, the field of education, will appreciate. There are complications, even so far as the churches themselves are concerned, if the State in taxation matters makes very special provisions for them. There are very real difficulties there. Hon. Members will appreciate that we are on the edge of a very serious problem, and on the edge of raising fears which I think most of us would far rather were left dormant.
The hon. Member for Maldon (Mr. Driberg) referred to the provision for the National Trust. That is a peculiar provision, and I think I can summarise it in this way. It provides that there is an exemption for bequests to the National Trust if they accompany the building which has to be maintained by the National Trust. That, in general, though not legally precisely expressed, is the substance of the matter. The hon. Member will appreciate that it is the essence of that matter that unless an adequate grant goes with the bequest of a large house which will have maintenance costs, the whole object of the bequest may fail, because indeed it may not be financially possible for the National Trust to accept the building at all. As I understand it that was the reason for the exemption.
The point about the universities is more complicated. I understand that in the Finance Bill last year there was some provision to limit the special circumstances and that to some extent was a discretionary limit. That is my recollection of the provision. I do not think that these cases, though the hon. Member for Maldon was perfectly right in quoting them, really enabled us to deal with the difficulty which. I ventured to pose to the Committee; the difficulty of going into the general charitable category and selecting an object with which most of us have great sympathy and saying, that while other objects with which others may have the same sympathy are not deserving of recognition, this particular example ought to have it.
The hon. Member may say, "Why not exempt the lot?" That is not the proposal before the Committee and, in any event, it would be a proposal which in

the present financial circumstances my right hon. Friend could not accept. Exemption over the whole sphere of charitable activities would cost something of the order of £4 million. I cannot give the financial element in this case. It is somewhat imprecise and it is not really the subject of the objection. It is not the strictly financial side; it is only the difficulty of separating it and distinguishing it from the other charitable activities which forces us to the conclusion that this is not the right way to deal with the problem of the churches.
Other hon. Members were good enough to suggest that there were other methods which might be explored. Obviously, without further consideration I can give no commitment with respect to any of these matters. But I can make clear our general attitude. We realise the financial difficulty of the churches and that it goes far beyond the purely building aspects of their work which is dealt with in this Clause. We fully realise that.
We realise also, in connection with the matter I touched upon a moment ago, the great difficulty of assisting. It is really self-delusion to distinguish so very sharply between an Exchequer grant and a tax concession, because in both cases the assistance is given at the cost of public funds. And although one may be a more painless and perhaps less ostentatious way of doing it, there is a certain similarity in the nature of each which I think hon. Members will not wholly overlook.
We have not, however, closed our minds on the general issue. We realise that the position of the churches is a matter of public concern. We realise that it goes beyond the concern of those who are, as so many of us are, members of the churches concerned. We believe it has a great public importance. We realise also that there is no matter which can raise more powerful feelings in rather opposing directions.
Therefore, our attitude is that we do not, for the reasons I have given, feel that help, if it is to be given, can be given in this way. We feel it produces an impossible discrimination between one form of charitable activity and another. But we do not exclude consideration later of other proposals which will help to meet the object with which as I have already indicated we have so much sympathy.

7.45 p.m.

Mr. John Edwards: All who have spoken in this debate will, I think, feel the greatest disappointment at what has been said by the Financial Secretary. The hon. Member for Bridlington (Mr. Wood), moved this new Clause in very restrained terms, and showed very adequately that here there was a real problem. He was not concerned—and I think that the Financial Secretary misunderstood him—with the financial difficulties of the churches in general. He was concerned solely with the position in respect of the buildings of all the denominations and in the relationship of those gifts which this Clause seeks to relieve from Estate Duty.
Here is a problem which, as has already been shown, is a national problem. I would say to the Financial Secretary that it does not involve any likelihood of trouble about religious denominations at all. The Financial Secretary implied that we were sitting on the edge of a volcano, and so on. The Clause is perfectly free from any kind of discrimination, and it has the additional merit of being a Clause which can be defended by those who have no religion at all, but who are interested in maintaining these places, some of which are of great beauty and antiquity.
Had the Financial Secretary said, "I understand the problem; I cannot do this, but I will do that," or had he said, "I will look at it in this way," we might have felt a little more satisfied. But he did not do that. He produced an argument with which I am perfectly familiar; indeed, it was the argument about the difficulty of drawing the line, which was advanced last year by my right hon. Friend. This is a familiar Treasury argument, and there are two ways in which we may talk about the difficulty of drawing the line.
One way is to talk about the technical difficulty of definition. I do not believe there is the slightest difficulty of definition here. It is easy to say what we mean. It is difficult to draw the line in another sense. It would be difficult to sustain the line if we could draw it. and that is an argument with which I have a great deal of sympathy. I think it is true that if we were to do precisely what is asked for here we should

be landed in a very great difficulty with other related groups, and, therefore, I expected the Financial Secretary to say something about some possible alternative.
I am sorry to have to refer to what happened last year, because, so far, nobody has really rubbed home the point. though it has been referred to very delicately. Let us consider what happened last year. On that occasion the right hon. Gentleman who is now the Leader of the House moved a new Clause which was precisely the same as this one. The hon. Member for Canterbury (Mr. Baker White) supported him, and the hon. Gentleman who is now the Parliamentary Secretary to the Ministry of Education said:
… I hope that the Treasury Bench's withers wherever situated, are not unwrung by the two urgent and moving speeches to which we have listened."—[OFFICIAL REPORT, 19th June, 1951; Vol. 489, c. 302.]
I remember the short, rather peremptory and very sharp intervention of the then right hon. Gentleman the Member for Bournemouth, now Lord Bracken. who now decorates another place.
I remember what the hon. and learned Member for Carmarthen (Mr. Hopkin Morris) said when he commented on this Clause. But what happened? My right hon. Friend the Member for Leeds, South (Mr. Gaitskell), got up and while —like the Financial Secretary today—not prepared to accept the Motion, made what I thought at that time to be a generous and forthcoming undertaking. In spite of that sympathetic and forthcoming undertaking, the then Opposition took everyone into the Division Lobby.
The present Leader of the House, making the final speech for the Opposition on that occasion, said:
… in my disappointment I shall certainly go into the Lobby in protest against his decision."—[OFFICIAL REPORT, 19th June, 1951; Vol. 489, c. 310.]
Today, we have had a reply which does not go anything like as far as my right hon. Friend went last year. He recognised the danger that some of these buildings might fall down. He said that if there was any way in which he could help, he would be prepared to do so. But right hon. Gentlemen opposite went into the Division Lobby although he had given that undertaking.
I should like to know from the Prime Minister, the Chancellor of the Exchequer, the Leader of the House and the Financial Secretary, all of whom voted on that occasion, how they can possibly reconcile what was then said and done with an answer today which does not go as far as the answer which my right hon. Friend gave last year which presupposed that work would be done on the matter in the intervening 12 months. I have no doubt that work was done, but now we cannot even get the remotest of hope.
There are limits to actions of this kind to which we should draw attention and about which, if I were sitting on the other side of the Committee, I seriously say that I should be a little ashamed on this occasion.

Mr. Wood: I must admit that I ant profoundly disappointed by the reply of my hon. Friend. His tone was extremely sympathetic and conciliatory, but there was not much content behind it. I must complain in the strongest terms at the short distance, or the negative distance, at which he was prepared to meet me.
I listened with great interest to the remarks of the hon. Member for Brighouse and Spenborough (Mr. J. Edwards). I do not agree with him that his conscience is as clear as it might have been. The undertaking of his right hon. Friend the Member for Leeds, South (Mr. Gaitskell) was not terribly encouraging, and that was the undertaking on which the hon. Gentleman went into the opposite Lobby. Although I do not think that our conscience is very clear on this matter, I do not think that his is any clearer.

Mr. J. Edwards: I should not have brought the word "conscience" into this discussion. I am as interested in this matter as is any hon. or right hon. Gentleman opposite, and in the light of what my right hon. Friend said last year I had every reason to suppose that, between then and the next Finance Bill, work would have been done to deal at least with the urgent cases. That is what I thought at the time, and that is what I still think. I did not say that I have a clear conscience, but there is the world of difference between that attitude and the attitude taken by the Financial Secretary.

Mr. Wood: I am sorry if I offended the hon. Gentleman by introducing the word "conscience." He used the word "ashamed." I was always taught that that somehow applied to whatever is our conscience. He says that work might have been done in the last 12 months. It seems to me that, whether or not work has been done, the Treasury, for reasons best known to themselves, have come to the conclusion with which I personally do not agree that they can make no distinction in this matter. I should have thought that it was not difficult for the Financial Secretary, who is a Member of a Government of a supposedly Christian country, to agree to give help to the Christian Church without any discrimination between the denominations.
The hon. Gentleman told us that he felt that it would be difficult to make distinctions between giving money for the repair and reconstruction of churches, on the one hand, and such objects as social work, on the other—missions abroad and so on. The distinction which I see, and which I think is most important, is that in all other cases the churches, if it is the churches which are affected, will not take on extra work which they cannot afford; but in this case we have the churches here and they will fall down unless we give the relief which they badly need.
The last point I wish to make to the Financial Secretary is that I should have thought that there was a case for singling out benefit to the places of worship from all other charitable objects. Probably we should all agree that there is nothing that means so much to everyone in this country as the places of worship, the churches and the chapels all over the land. All people may not go into them, but they all look at them, and I am certain that they all admire them. Apart from those who may be without any appreciation at all, I am certain that nearly everybody is intensely proud of them and delighted that they exist. They would be most upset if they fell into disrepair. That is the first difference which I see between these and all other charitable objectives.
The second point is that in no other case does the combination exist so strongly. On the one side, there is the responsibility which the State must bear for the disrepair of these churches—for


the very good reason that licences have not been allowed—and, on the other side, there is the point that these churches, many of them very old ones, are just those buildings which must quickly fall into disrepair. Therefore, we have the combination between the State responsibility and the extreme vulnerability of these buildings. In my conscience—if the hon. Gentleman the Member for Brighouse and Spenborough does not object to that word—I cannot honestly ask leave to withdraw the new Clause unless my hon. Friend persuades himself to some kind of deathbed repentance.

Mr, Driberg: I should like to add a few words to what has been said by the hon. Member for Bridlington (Mr. Wood). Incidentally, it would be a great pity if an issue which is above party degenerated in any way into an inter-party argument—this argument about what was said and done last year. I rather share the view of my hon. Friend the Member for Brighouse and Spenborough (Mr. J. Edwards) that it was just a little unreasonable to divide last year in view of what had been said by the then Chancellor of the Exchequer. However, I do not want to labour that point unduly.
8.0 p.m.
I must confess I cannot see how the Financial Secretary can really reject this new Clause this year, in view of the action of the official Opposition last year and the very eloquent speeches made on that occasion. However, it will be a pity if this should become an inter-party dispute when it is not a party point at all.
There is one point about what he said about the National Trust. It occurs to me that, at any rate, Nonconformist churches, or many of them, must be in the same position as the National Trust. since they are in the hands of trustees, and that would provide some basis for a comparison.
On the general argument advanced by the Financial Secretary, he seemed to say two things. First of all, he used that terribly familiar argument that, because we cannot do everything, we will not do anything. After all, this new Clause has been put down on the Order Paper, and there is not a whole series of new Clauses advancing the claims of different charitable organisations, and I should have thought that the question of doing

everything does not arise at all at this stage.
The other argument seemed to me to be a little misleading, because the hon. Gentleman seemed to be trying to indicate that he and the Treasury would perhaps try to think of some other way of achieving the same desirable result, but, surely, from his point of view, the same criticism would apply to that other method of achieving the same result?
Surely, there again, he would come up against the difficulty of discriminating between one good cause and another. If he found some quite different method of taxation relief to help the churches, he would be confronted again with the same query—why single them out from all other charitable causes? I cannot see that that was a very sound argument to put to the Committee, in view of what the Financial Secretary had said just before about not being able to single out the churches.
I was very glad to hear the hon. Member for Bridlington say that he was not prepared to ask leave to withdraw the Motion, and I hope, that, if we proceed to a Division, we shall have a completely free vote on an issue of this kind.

Mr. R. A. Butler: I support every word that the Financial Secretary said in his answer. We have looked at this matter most carefully, and we do not under-rate the sincerity of the hon. Member for Bridlington (Mr. Wood), the hon. Member for Maldon (Mr. Driberg), right hon. Gentlemen opposite or anybody else.
Frankly, as I have said in a letter, a copy of which I have here, to the Commission for the Repair of Churches, and to Mr. Ivor Thomas, who was an hon. Member of this House some time ago, in a correspondence into which he entered with me on behalf of the churches, I cannot make a differentiation between these and other what I may describe as good and high causes. If I could have found a method, I would have authorised the Financial Secretary to say so.
Not being able to find another method, I have liabilities too heavy for me to undertake at the present time, and, however carefully we have looked into the matter, we have not been able to find a solution. I have so informed the churches, and I am afraid that, with great regret, I must leave matters where they are.

Question put, "That the Clause be read a Second time."

The Committee divided: Ayes 168; Noes, 197.

Division No. 150.]
AYES
[8.5 p.m.


Anderson, Frank (Whitehaven)
Henderson, Rt. Hon. A. (Rowley Regis)
Price, Joseph T. (Westhoughton)


Awbery, S. S.
Herbison, Miss M.
Proctor, W. T.


Bartley, P.
Hewitson, Capt. M
Pryde, D. J.


Bence, C. R.
Hobson, C. R
Reeves, J.


Benson. G.
Holman, P.
Reid, Thomas (Swindon)


Bevan, Rt. Hon. A. (Ebbw Vale)
Holmes, Horace (Hemsworth)
Rhodes, H.


Blenkinsop, A.
Hoy, J. H.
Richards, R.


Blyton, W. R.
Hubbard, T. F.
Roberts, Albert (Normanton)


Boardman, H.
Hudson, James (Ealing, N.)
Robinson, Kenneth (St. Pancras, N.)


Bowles, F. G.
Hughes, Emrys (S. Ayrshire)
Royle, C.


Brockway, A. F.
Hughes, Hector (Aberdeen, N.)
Schofield, S. (Barnsley)


Brook, Dryden (Halifax)
Hynd, H. (Accrington)
Shackleton, E. A. A


Broughton, Dr. A. D. D
Irvine, A. J. (Edge Hill)
Shawcross, Rt. Hon. Sir Hartley


Brown, Thomas (Ince)
Irving, W. J. (Wood Green)
Shinwell, Rt. Hon. E.


Burton, Miss F. E.
Isaacs, Rt. Hon. G. A.
Short, E. W.


Carmichael, J.
Jeger, Dr. Santo (St. Pancras, S.)
Shurmer, P. L. E.


Castle, Mrs. B. A
Johnson, James (Rugby)
Silverman, Julius (Erdington)


Champion, A. J.
Jones, David (Hartlepool)
Simmons, C. J. (Brierley Hill)


Chapman, W. D.
Jones, T. W. (Merioneth)
Slater, J.


Chetwynd, G. R.
Keenan, W.
Smith, Ellis (Stoke, S.)


Clunie, J.
King, Dr. H. M.
Sorensen, R. W.


Coldrick, W.
Kinley, J.
Sparks, J. A.


Collick, P. H.
Lee, Frederick (Newton)
Steele, T.


Cove, W. G.
Lee, Miss Jennie (Cannock)
Strachey, Rt. Hon J


Craddock, George (Bradford, S.)
Lever, Leslie, (Ardwick)
Summerskill, Rt. Hon. E.


Cullen, Mrs. A.
Lindgren, G. S.
Sylvester, G. O.


Daines, P.
Logan, D. G.
Taylor, Bernard (Mansfield)


Davies, A. Edward (Stoke, N.)
MacColl, J. E.
Taylor, John (West Lothian)


Davies, Ernest (Enfield, E.)
McInnes, J
Taylor, Rt. Hon. Robert (Morpeth)


Davies, Harold (Leek)
McKay, John (Wallsend)
Thomas, David (Aberdare)


Davies, Stephen (Merthyr)
McLeavy, F.
Thorneycroft, Harry (Clayton)


Deer, G.
MacMillan, M. K. (Western Isles)
Thurtle, Ernest


Dodds, N. N.
MacPherson, Malcolm (Stirling)
Timmons, J.


Driberg, T. E. N.
Mann, Mrs. Jean
Tomney, F.


Ede, Rt. Hon. J. C.
Manuel, A. C.
Viant, S. P.


Edelman, M.
Marquand, Rt. Hon. H A.
Wallace, H. W.


Edwards, John (Brighouse)
Mayhew, C. P.
Watkins, T. E.


Evans, Albert (Islington, S.W.)
Messer, F.
Weitzman, D.


Ewart, R.
Mikardo, Ian
Wells, William (Walsall)


Fernyhough, E
Mitchison, G. R.
West, D. G.


Field, W. J.
Monslow, W.
White, Mrs. Eirene (E. Flint)


Fienburgh, W.
Moody, A. S.
White, Henry (Derbyshire, N.E.)


Forman, J. C.
Morgan, Dr. H. B. W.
Whiteley, Rt. Hon. W.


Fraser, Thomas (Hamilton)
Morris, Percy (Swansea, W.)
Wigg, George


Freeman, John (Watford)
Morrison, Rt. Hon. H. (Lewisham, S.)
Wilkins, W. A.


Greenwood, Anthony (Rossendale)
Mort, D. L.
Willey, Frederick (Sunderland, N.)


Grey, C. F.
Moyle, A.
Willey, Octavius (Cleveland)


Griffiths, Rt. Hon. James (Llanelly)
Murray, J. D.
Williams, David (Neath)


Grimond, J.
Neal, Harold (Bolsover)
Williams, Ronald (Wigan)


Hale, Leslie (Oldham, W.)
Oldfield, W. H.
Williams, W. R. (Droylsden)


Hall, John (Gateshead, W.)
Oliver, G. H.
Williams, W. T. (Hammersmith, S.)


Hamilton, W. W.
Oswald, T.
Wilson, Rt. Hon. Harold (Huyton)


Hardy, E. A.
Paling, Rt. Han. W. (Dearne Valley)
Winterbottom, Ian (Nottingham, C.)


Hargreaves, A.
Pargiter, G. A.
Woodburn, Rt. Hon. A.


Harrison, J. (Nottingham, E.)
Paton, J.
Wyatt, W L.


Hastings, S.
Pearson, A.



Hayman, F. H.
Plummer, Sir Leslie
TELLERS FOR THE NOES:




Mr. Snow and Mr. Eric Fletcher.




NOES


Aitken, W. T.
Bevins, J. R. (Toxteth)
Clarke, Col. Ralph (East Grinstead)


Allan, R. A. (Paddington, S.)
Birch, Nigel
Cole, Norman


Alport, C. J. M.
Bishop, F. P.
Craddock, Beresford (Spelthorne)


Amory, Heathcoat (Tiverton)
Boyd-Carpenter, J. A.
Crookshank, Capt. Rt. Hon. H. F. C


Anstruther-Gray, Major W. J.
Boyle, Sir Edward
Crosthwaite-Eyre, Col. O. E.


Arbuthnot, John
Braithwaite, Lt.-Cdr. G. (Bristol, N.W.)
Crouch, R. F.


Ashton, H. (Chelmsford)
Brooman-White, R. C.
Crowder, John E. (Finchley)


Assheton, Rt. Hon. R. (Blackburn, W.)
Buchan-Hepburn, Rt. Hon. P. G. T.
Crowder, Petre (Ruislip—Northwood)


Astor, Hon. W. W. (Bucks, Wycombe)
Bullard, D. G.
Darling, Sir William (Edinburgh, S.)


Baker, P. A. D.
Bullock, Capt. M.
Deedes, W. F.


Baldock, Lt.-Cmdr. J. M.
Bullus, Wing Commanler E. E.
Dodds-Parker, A. D.


Baldwin, A. E.
Burden, F. F. A.
Donaldson, Cmdr. C E. McA


Banks, Col. C.
Butcher, H. W.
Donner, P. W.


Barber, A. P. L.
Butler, Rt. Hon. R. A. (Saffron Walden)
Doughty, C. J. A.


Baxter, A. B.
Carr, Robert (Mitcham)
Drayson, G. B.


Beach, Maj. Hicks
Carson, Hon. E.
Drewe, C.


Bennett, Sir Peter (Edgbaston)
Cary, Sir Robert
Duncan, Capt. J. A. L


Bennett, Dr. Reginald (Gosport)
Channon, H.
Duthie, W. S.




Elliot, Rt. Hon. W. E
Lloyd, Maj. Guy (Renfrew, E.)
Roberts, Peter (Heeley)


Erroll, F. J
Lloyd, Rt. Hon. Selwyn (Wirral)
Robinson, Roland (Blackpool, S.)


Fell, A. 
Longden, Gilbert (Herts, S.W.)
Robson-Brown, W.


Finlay, Graeme
Lucas, Sir Jocelyn (Portsmouth, S.)
Rodgers, John (Sevenoaks)


Fisher, Nigel
Lucas, P. B. (Brantford)
Roper, Sir Harold


Fleetwood-Hesketh, R. F.
Lucas-Tooth, Sir Hugh
Ropner, Col. Sir Leonard


Fletcher-Cooke, C.
McAdden, S. J.
Russell, R. S.


Gage, C. H
McCorquodale, Rt. Hon. M. S.
Ryder, Capt. R. E. D.


Galbraith, Cmdr. T D. (Pollok)
Macdonald, Sir Peter (I. of Wight)
Salter, Rt. Hon. Sir Arthur


Galbraith, T. G. D (Hillhead)
Mackeson, Brig. H. R.
Savory, Prof. Sir Douglas


Garner-Evans, E. H.
McKibbin, A. J.
Schofield, Lt.-Col. W. (Rochdale)


Godber, J. B.
McKie, J. H. (Galloway)
Scott, R. Donald


Gomme-Duncan, Col. A
MacLeod, Rt. Hon. Iain (Enfield, W.)
Shepherd, William


Gower, H. R.
Macpherson, Maj. Niall (Dumfries)
Simon, J. E. S. (Middlesbrough, W.)


Graham, Sir Fergus
Maitland, Patrick (Lanark)
Smithers, Peter (Winchester)


Gridley, Sir Arnold
Manningham-Buller, Sir R. E.
Snadden, W. McN.


Grimston, Hon. John (St. Albans)
Marshall, Douglas (Bodmin)
Speir, R. M.


Grimston, Sir Robert (Westbury)
Marshall, Sidney (Sutton)
Stevens, G. P.


Harris, Reader (Heston)
Maude, Angus
Stoddart-Scott, Col, M


Harrison, Col. J. H. (Eye)
Maudling, R.
Storey, S.


Harvey, Ian (Harrow, E.)
Maydon, Lt.-Comdr. S. L. C
Strauss, Henry (Norwich, S.)


Heald, Sir Lionel
Medlicott, Brig. F.
Studholme, H. G.


Higgs, J. M. C.
Mellor, Sir John
Sutcliffe, H.


Hill, Dr. Charles (Luton)
Molson, A. H. E.
Taylor, William (Bradford, N.)


Hill, Mrs. E. (Wythonshawe)
Monokton, Rt. Hon. Sir Walter
Thomas, Rt. Hon. J. P. L. (Hereford)


Hinchingbrooke, Viscount
Nabarro, G. D. N.
Thomas, P. J M. (Conway)


Holland-Martin, C. J.
Nicholls, Harmar
Thompson, Kenneth (Walton)


Holmes, Sir Stanley (Harwich)
Nicholson, Godfrey (Farnham)
Thompson, Lt.-Cdr. R. (Croydon, W.)


Hornsby-Smith, Miss M P
Nicolson, Nigel (Bournemouth, E)
Thorneycroft, Rt. Hn. Peter (Monmouth)


Horobin, I. M.
Nield, Basil (Chester)
Turner, H. F. L.


Howard, Gerald (Cambridgeshire)
Noble, Cmdr. A. H. P.
Turton, R. H.


Howard, Greville (St. Ives)
Nugent, G. R. H.
Vosper, D. F.


Hulbert, Wing Cmdr N. J.
Odey, G. W.
Wakefield, Edward (Derbyshire, W.)


Hutchison, Lt.-Com. Clark (E'b'rgh W.)
O'Neill, Rt. Hon. Sir H. (Antrim, N.)
Ward, Miss I. (Tynemouth)


Jenkins, R. C. D. (Dulwich)
Ormsby-Gore, Hon. W. D.
Waterhouse, Capt. Rt. Hon. C.


Jennings, R.
Orr-Ewing, Charles Ian (Hendon, N.)
Watkinson, H. A.


Johnson, Eric (Blackley)
Osborne, C.
Wellwood, W.


Johnson, Howard (Kemptown)
Partridge, E.
White, Baker (Canterbury)


Jones, A. (Hall Green)
Peake, Rt. Hon. O.
Williams, Rt. Hon. Charles (Torquay)


Joynson-Hicks, Hon. L. W
Perkins, W. R. D.
Williams, Gerald (Tonbridge)


Kaberry, D.
Peto, Brig, C. H. M
Williams, Sir Herbert (Croydon, E.)


Keeling, Sir Edward
Pickthorn, K. W. M.
Williams, R. Dudley (Exeter)


Lambert, Hon. G.
Powell, J, Enoch
Wills, G.


Lancaster, Col. C. G
Price, Henry (Lewisham, W.)
Wilson, Geoffrey (Truro)


Langford-Holt, J. A.
Profumo, J. D.
York, C


Law, Rt. Hon. R. K.
Raikes, H. V.



Legge-Beurke, Maj. E. A. H
Rayner, Brig. R.
TELLERS FOR THE NOES:


Legh, P. R. (Petersfield)
Redmayne, E.
Mr. Heath and Mr. Oakshott


Linstead, H. N.
Renton, D. L. M

New Clause.—(POWER TO REQUIRE PRODUCTION OF BOOKS AND ACCOUNTS.)

Subsection (1) of section thirty-one of the Income Tax Act, 1952 (which relates to the power of the Commissioners of Inland Revenue to require the production of accounts and books) shall be amended by substituting the word "surveyor" where reference is made to the "Commissioners of Inland Revenue."—[Mr. Gaitskell.]

Brought up, and read the First time.

8.15 p.m.

Mr. Gaitskell: I beg to move, "That the Clause be read a Second time."
It is commonly asked nowadays how it is that with the present rate of taxation in this country there is still so much extravagance. I am sure hon. Members have had that question put to them. I certainly have had it put to me, not only in this country but even recently when I was in the United States. The answer, I think, is first of all that some people supplement any spending out of income

by drawing on their capital and they may also be further assisted in that respect by capital gains. Secondly, so it is commonly believed, they are able to charge up to an expense account quite a lot of what they spend, and thirdly, there is tax avoidance and tax evasion.
At a later stage we shall be discussing the question of expense accounts. Some of my hon. Friends have put down an extremely important new Clause which I fear we shall not reach until well on into tomorrow, but I am sure it will be a very interesting debate when we get there. This Clause is designed to assist the campaign against tax evasion. It is not concerned with tax avoidance; I should like to make that plain. It, therefore, continues the good work that we began last year in trying to amend the law so as to strengthen the powers of those whose job it was to enforce it.
The Committee will agree that there is widespread anxiety about the persons who


do escape the net of taxation. That is a very serious thing, because whereas high taxation is, no doubt, always regarded in itself as an unpleasant thing, nevertheless so long as people feel that it is fair as between different members of the community, the British at any rate are inclined to accept it. But if they feel that the net is drawn so loose that all sorts of people are able to evade taxation it naturally has a bearing upon their own attitude to paying taxes.
Let me give one or two examples. Where there is, in the case of some small businesses, fraudulent withdrawing, or extraction—as I believe it is called by the Inland Revenue officials—of net receipts, these, of course, being withheld and a lower profit shown, supported if necessary by fraudulent records; where there is under-valuation of assets, which again enables the firm or person concerned to show a lower profit and, therefore, pay a lower tax; where there are perhaps concealed secret reserves, sometimes even secret accounts, I am sure that we would all agree that this is something which we have to try to do our best to eliminate.
I also hope to carry the Committee with me in saying that it is clearly essential that those concerned with the enforcement of the law should be able to get access easily and quickly and without difficulty to the original records and accounts. I dare say many hon. Members may believe that tax inspectors already have all the powers that are necessary, and I must confess that I was surprised to find that this was not so. But I am afraid there is no doubt that at the moment the tax inspectorate is directly hampered by what seems to me in some respects a rather antiquated system, and this Clause is designed to make a small but useful improvement which will help the inspectorate considerably.
One reason for this is, of course, that in the legislation Income Tax inspectors are not treated as officials—not as ordinary members of a Civil Service Department acting in the name of a Minister. They are separate persons. They are surveyors, and in contrast with the various commissioners—various types of commissioners—with whom the power lies. The second point is that even these

commissioners, although they certainly have the powers, are restricted or limited in certain ways.
I expect the Committee will be aware that, so far as the ordinary individual is concerned, he is required only to fill in the necessary form which is sent to him saying what his profit may be. It is on an appeal to the general commissioners that the question of powers to compel the production of accounts and records arises. They—the general commissioners—of course, have this power if they are. not satisfied with the statement that has been put in. The inspector has the right to copy any of the documents which are then produced, but each time that he wants to obtain additional information he has to go to the general commissioners and seek their permission.
I submit to the Committee that that must, in the nature of things, lead sometimes to an awkward position, because he may have information of a very indefinite character—nothing more, perhaps, than a suspicion, or something he has heard. He may not by any means wish to disclose it, and it may be, in fact, rather awkward at that stage to disclose it, until he has been able to confirm suspicions he may have had. He is rather in this position, that he has, may be, no more than a hunch based on some slightly suspicious-looking figures.
Real proof, even, one may say, a prima facie case will depend on the production of the records and accounts, and he cannot get those until he has convinced the Commissioners that there is, so to speak, a prima facie case. I must add to that that, of course, there is one other method open to him, and that is to persuade the Commissioners of Inland Revenue themselves, who also have powers in this matter. That means, however, of course, quite an elaborate business of submitting the whole case to the Commissioners, who have to be in a position where they are not satisfied with the statement delivered by the person concerned.
Now, this new Clause is a very simple one, and it simply substitutes the word "surveyor" for the words "Commissioners of Inland Revenue" in Section 31 of the 1952 Income Tax Act. That Section is, of course, the one which gives the Commissioners of Inland Revenue these powers to compel where necessary the production of the accounts and documents


and so on. It would, therefore, make it possible for the inspectors, without referring the matter to headquarters, when they are suspicious to obtain these necessary documents.
I should have thought that this was a very reasonable thing to concede. Let me say at once that I think that in the overwhelming majority of cases the ordinary business would, of course, produce anything that the inspector of taxes required. But that is just the point. It is in the unusual case—of the man who is really trying to evade the law—that difficulties may arise. If hon. Members opposite are sincere in their desire to stop tax evasion, as they continually tried to maintain last year, despite their opposition to a great deal of last year's Finance Act, then they should certainly agree with us that this small step is one we should now take to strengthen the powers of the inspectorate.

Sir Richard Acland: I should like to support this new Clause, which, I think, is one of several on the subject of tax evasion and avoidance, which seems to me a most important subject at this time. We are divided into two classes in many ways, but one way in which we are divided into two classes is this, that we are divided into the class of those people whose incomes are known beyond peradventure—very often perfectly well known to the neighbours because of the jobs people declare they do, but certainly well known to the Inland Revenue—beyond all difficulty of ascertaining the amount.
In that class, of course, are all wage earners and salary earners, all on pensions—and, to be perfectly fair, all who are pure rentiers, who draw their money from interest on National Savings or for dividends on shares which they hold in large companies, where, although their neighbours may not know what the income is, there is very little opportunity for deceiving the Inland Revenue inspectors.
Then in the other class, much smaller in numbers but probably, man for man, very much wealthier than the first class I have dealt with, are the people whose incomes it is extraordinarily difficult for anybody to know exactly—difficult certainly for their neighbours, and at least almost as difficult for the Commissioners of Inland Revenue. Those people are engaged in all sorts of different kinds of trade and commerce. The wholesaler in

the vegetable market at Covent Garden—who knows what that man is really getting today?
People in my constituency, who try to do a decent day's work, have a shrewd idea that many people in that sort of position are getting away with a lot, and that does spread a rather discouraging atmosphere. It is perfectly obvious up and down the country that a lot of money is being spent, and one does not know where it comes from—if one simply takes the Treasury's figures of how many people there are earning incomes of the different sizes it says are being earned, and of the numbers of the incomes of the size on which Income Tax is being paid.
I remember reading a very long time ago, when the Labour Government were in power, in 1949, a piece in that admirable periodical the "Tribune" —not by one of its regular contributors, but by a gentleman named Mr. Hutchinson, now a correspondent of the "Daily Mirror," I believe. He wrote:
 "It is socially imperative to do something quickly to end the legalised robbery of the people by the suppliers and distributors of food, clothing, consumer goods and services. And it is precisely here that nothing is being done. What is happening is that the greatest social advance ever made by Britain is being sabotaged by the riff-raff of private enterprise, which happens to be that part of the system with which the working man and his wife come into daily contact. The average working man is being gypped—and he knows it
He is being gypped by people in very obscure positions in commercial transactions who have succeeded in concealing from the Inland Revenue Department their operations.
There is among our people—I will not say hatred—but smouldering resentment against what is going on now, and if Parliament and if the Government can see their way to accept this new Clause. to take resolute action against these people, it will result—I do not say in the revolutionary effect of hundreds of millions of pounds of greater collection of tax—but in a very large increase in the collection of tax; and it will be an encouragement to the ordinary man who is paying his tax, because he will see that the Government are prepared to take action in the cases of people who persistently evade their payment of tax.

Mr. Maudling: The question of tax evasion is, of course, very important.


The right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) moved this Clause, as we should have expected of him, in moderate and measured terms, and I would hope that we could discuss this subject apart from party or class bias, because that is quite unnecessary and quite inappropriate. It is true that there is tax evasion in this country. That tax evasion is not confined to any particular section or class of the community; nor is it confined to traders. Wage earners—of all classes of the community—are in a position to avoid tax—or rather to evade tax, because it is evasion we are discussing now. It is a general problem, and I hope we can approach it as a general problem.

Mr. Mulley: The hon. Gentleman would not mislead the Committee by suggesting that this applies to Schedule E as well as to Schedule D? This Clause is purely for Schedule D. Although the temptation, perhaps, to evade tax is widespread, as the hon. Gentleman says, the opportunity—and that is the relevant point—to evade tax is much greater under Schedule D than it is among the wage earners.

8.30 p.m.

Mr. Maudling: The hon. Gentleman is quite wrong. It is easy for a wage earner to evade tax by not declaring casual earnings. I do not want to enter that discussion; I want to point out that the question of tax evasion should be approached and dealt with as a national problem.
Though it is true that there is substantial evasion of tax and that the revenue authorities have been making a drive against it for some time, I should say that there is less tax evasion in this country than in any other country in the world. The standard of probity of the British taxpayer is exceedingly high. It is sometimes said that if anything is liable to bring this Empire down it is because we have a too efficient tax-gathering system.
We must get this matter in perspective. If we talk too much about tax evasion we may give people abroad a wrong impression about our tax morality, which I consider bears comparison with any country in the world. But the question of evasion is an important matter, and the revenue authorities have been making a drive against evasion, and that drive

is continuing, because the higher the burden of tax on the people the more intolerable it is that certain people by evading their legal burdens throw an even greater burden on those who pay their taxes.
The question which arises from the proposed Clause is whether we should in this way assist the revenue authorities in their job of preventing evasion. It is the desire of the Government, as it is the desire of the Committee, that everything possible shall be done to prevent tax evasion. On the other hand, we must also bear in mind the sound principle that it is wrong to give the Executive additional powers over the individual citizen unless they are necessary. That is a general statement of principle with which all will agree.
The powers contained in Section 31 of the 1952 Act, to which the proposed Clause refers, are reproduced from Section 35 (1) of the 1942 Act, which was introduced by the coalition Government. It was made clear at that time by the then Attorney-General that those specific powers were reserved to the Commissioners themselves because it was considered, in the first place, that they should not be used lightly, and, in the second place, that they should be used consistently throughout the country. If they are used by the central authority, they will be used consistently.
It is a fact, as the right hon. Gentleman pointed out, that the overwhelming majority of traders put in their accounts in a proper and honest form and no question of evasion arises, but there is a minority of cases in which the possibility of evasion does arise. What are the powers which already exist? The additional Commissioners—they are the local unpaid assessing authority for Schedule D—have the power when they think that there is any evasion to raise an assessment on the trader at a figure which they consider to be the right figure. It is then for the taxpayer, if he thinks that it is too high, to appeal against it. That appeal goes to the local general Commissioners and they have the power in those circumstances to demand that the trader produces his account. That is a very effective sanction, and it is the sanction which is normally used.
The powers under the Act of 1942 which are reproduced in the Act of 1952


are used only in cases of wilful default or possible fraud. The powers are twofold. In the first place, there is the power to demand from the taxpayer copies of his accounts and that power is used by the Commissioners of Inland Revenue themselves in cases where a taxpayer proves recalcitrant and refuses to produce adequate accounts.
The second power, which is to demand the actual business books themselves, is used only in cases of suspected fraud. Cases of suspected fraud are dealt with not by the local inspectors but by specialist officers, and that is why those powers are not given to the local inspectors who do not deal with cases of suspected fraud.
I am advised that the Board of Inland Revenue consider the existing powers adequate and that it is right that the exercise of the powers referred to in the new Clause should be confined to themselves. Referring to the principles which I enunciated at the beginning, I suggest that while we should do everything we can to strengthen the hands of the Executive in dealing with tax evasion, we should not seek to thrust upon the Executive powers over individual citizens which they do not consider they need in pursuance of their duties
.
In these circumstances, I hope the Committee will realise that in asking the Committee to reject the proposed Clause I am not attempting to protect the tax evader or to weaken the position of the Inland Revenue, but because I am convinced on the information given to me that adequate powers already exist to deal with the problem, which is a serious one and one which Her Majesty's Government are fully determined to continue pursuing in the way in which their predecessors vigorously pursued it.

Mr. Julian Snow: I never stop admiring the facility with which the hon. Gentleman makes that sort of speech, and I congratulate him on it, but, on the other hand, there is this to be said, that when he says that the powers of the Commissioners stem from the 1942 Act he might reconsider the Clause, because what may have been apparent regarding evasion in 1942 bears no relationship at all to what happened in the post-war period.
This is not peculiar to this country by any means. I hope the hon. Gentleman

will not again press the argument that the tax-paying morality of this country is of a far higher standard than that of any other country. I have heard that argument used before. My right hon. Friend the Member for South Shields (Mr. Ede) used it on one occasion when I suggested that the licensing laws of the country were out of date and should be abolished. He replied that there was less drunkenness in this country than on the Continent, and I said that I thought that was a highly Jingoistic argument, and I make the same comment about that sort of argument applied to tax evasion.
It is apparent that in the post-war period there has been substantial tax evasion, not on the part of individuals in the community who do not correctly see where their duty lies, but in certain categories of trade and commerce which lend themselves to tax evasion and where, for all I know, the people consider that they have been unsatisfactorily treated by the forms of tax.
Therefore, if the Government of the day passes a tax and the tax is maintained and sustained by the following Government—that is the position in many cases with the present Government—then, knowing that there has been substantial tax evasion, it is the duty of the House, and not the Commissioners of Inland Revenue, to decide what additional powers are necessary. Bearing in mind what has happened since the end of the war, additional powers are obviously needed.
I realise that there is a great deal of sensitivity about giving additional powers to inspectors. This is not a party matter at all, for we do not like extending these powers, but, on the other hand, when the national economy is suffering and when people in the lower income groups suffer because people in the higher income groups are not paying their taxes, it is for the House of Commons to decide that additional powers are necessary. I hope that the hon. Gentleman will consider this point.

Mr. Baker White: Like all hon. Members on both sides of the Committee, I am anxious to see anything done to stop tax evasion, but it is wrong to allow to go out from here unanswered the grave and very general charge made by the hon. Baronet the Member for Gravesend (Sir R. Acland) against traders


in Covent Garden Market. He may not have meant it as such, but that is how it will appear in the OFFICIAL REPORT tomorrow.

Sir R. Acland: I am sorry if I appeared to make a general charge against such traders. When my words are read, I think they will be found to be giving an example of the sort of place where some of the traders are getting away with tax evasion. I could have selected many other examples.

Mr. Baker White: I am glad to have that assurance from the hon. Member, because there does not exist in Covent Garden any more evasion than in many other places. Might I make my association with Covent garden perfectly clear? I have had an experience of Covent Garden and other markets from the selling end for over 30 years. I have no interest in the market except the sending of my goods to be sold there. One can point to cases of tax evasion in Covent Garden and other markets just as one can point to them in other trades, but my experience is that those who work in Covent Garden are a body of respectable and honest citizens.
There are three safeguards against tax evasion. The Ministry of Food have power to inspect the trader's books. If there is any doubt between a grower and the market man the National Farmers' Union have power to inspect the books. There is a further safeguard. The National Federation of Fruit and Potato Trades, Ltd., exercises a supervision and secures a proper standard of dignity. I am glad of the hon. Member's assurance, because I do not think that what he said would apply to the market or the people who are in the market. They are not a dishonest people at all.

Mr. George Benson: We on this side of the Committee welcome the speech of the hon. Member for Canterbury (Mr. Baker White) because we are asking for certain additional powers for inspectors of taxes, including the power to inspect the books. The hon. Member has told us that in the markets there are two bodies who have power to inspect the books of the traders, the Ministry of Food and apparently the National Farmers' Union. That is extremely useful knowledge which is new

to me. If it is correct, I see no reason why this power to inspect the books of traders should not be given to the Board of Inland Revenue.
Hon. Members opposite have told us that the Board of Inland Revenue have quite sufficient power. Such people as local inspectors of taxes consider that they have not sufficient powers. They have very strong views on it. Why is it wrong that they should have the power? Why is it wrong to increase the powers of the Executive—I think that was the particular phrase used by the Parliamentary Secretary—in this matter? Everybody who is liable to tax is supposed to produce details of their income. Merely to inspect the books to see if those particulars are correct is surely not a very large extension of the power.
The terrific resistance on the part of hon. Gentlemen opposite to any investigation by the taxation authorities into income is a hangover from Pitt's time. When Income Tax was first introduced it was looked upon as such a tyrannical tax by this honourable House that it was thought quite outside the bounds of possibility to entrust that power to the Executive. The result was that Income Tax was first collected not by the Treasury or by the Government, but by local commissioners of taxes who were appointed by the local bench. This idea that the Executive or the Board of Inland Revenue has no right to investigate the financial affairs of a private individual is a hangover from that time.
8.45 p.m.
We know that a certain amount of tax evasion goes on, but I do not think it is a very large amount. There is a certain amount of it and, with the high rate of taxation, not merely does it throw an additional burden upon the honest taxpayer, but it gives an enormously increased incentive to tax evasion. Anybody who has talked on this matter with a local inspector of taxes knows that to find any trace of this evasion is very largely a piece of detective work. The bulk of the ordinary cases of evasion by commercial firms are generally discovered not by any suspicion that is aroused by the books of the firm, but as a result of the investigation of the books of other companies with whom the particular evading firm is trading. Certain accounts and entries may be


found in the books of the honest firm with no corresponding entries in the books of the dishonest firm.
It is little hints like that which put the inspector of taxes on to the possibility that a certain firm is keeping double books or is evading taxation. For that reason the inspection of books is very valuable in the building up of a case. In order to discover evasion this power ought to be granted. The inspector of taxes might suspect that there is some jiggery-pokery going on in the case of certain firms, but before he can get access to the books he has got to convince the Additional Commissioners first and, after that, he may appeal to the Special Commissioners. He is tremendously hampered in building up his case, because he cannot get at the books themselves. I do not think the Parliamentary Secretary has made out a valid case against this new Clause.

Mr. Mulley: I am sorry to detain the Committee—some people seem to be looking at the clock—but although on paper this seems a simple and unimportant Clause, it is very important. It is consistent with the line which we have adopted all along, unlike the attitude of hon. Members opposite who, when in opposition, pursued a different line to that when they became the Government. We are consistent in this matter of tax evasion,
I agree with the general views which the Parliamentary Secretary expressed about the morality of the British taxpayer. I am quite sure that the average British workman would not wish to evade his full tax responsibility but I would suggest to the Parliamentary Secretary that before he comes to the Committee with stories about giving more powers to the Executive and the Gladstonian view of Income Tax returns, he should remember the man who pays under Schedule E, for example, the ordinary British workman. His money is being taken away before he gets his week's earnings, and in view of that it is not unreasonable to ask that Inland Revenue Inspectors should have the right to inspect the accounts of any firm.
The same is true—I do not want to present a "worker versus non-worker" issue on this point—of the man who has investments in a public company, where

tax is deducted at source. His money is taken away before he knows what his in come from that source is to be. The position in regard to Schedule D is that so long as the taxpayer fills in a prescribed form he does not have to submit an account to the Inland Revenue. Neither the inspectors, the Board, nor the Commissioners, have power to make accounts be kept.
The Parliamentary Secretary said that the machinery is simple. What happened was that the Additional Commissioners, if they were not satisfied with the return, made an assessment of the amount they think proper. How can an Additional Commissioner make an assessment that he thinks proper if he has not the accounts on which to make it? Of course, by this machinery he makes an unusually high assessment and brings forth an appeal from the person assessed, and by virtue of the appeal he then has power, not to examine books but merely to examine and copy the accounts.
I used to think that hon. Gentlemen opposite were against red tape, but we have the Parliamentary Secretary tonight solemnly saying that this is a perfectly satisfactory arrangement. Three or four stages have to be gone through, with public servants at the public expense going through this rigmarole in order that accounts of a doubtful character might be examined. If the accounts do not appear to be satisfactory, the Income Tax inspector has to go to the Commissioners for permission to examine the business books.
It may be necessary to go as high as the board of Inland Revenue, to see the full business books and the records of the firm. To establish such a claim, evidence has to be produced by the Inland Revenue inspector that there is some irregularity, or that he has a prima facie case of it, in order to make it justifiable for this machinery to be set in operation, and to persuade the Commissioners on the one hand, or the board on the other hand, to give him the necessary permission.
When a great number of people are having their taxes taken away even before they know what their income is, it is not unreasonable to ask that the inspectors should have discretion in asking to see the accounts. The proposed new Clause does not go so far as asking to see the


books. The Parliamentary Secretary, with his newly found enthusiasm for anti-tax evasion, may care to introduce—we could not do so—

Mr. Maudling: I do not know what anti-tax evasion is.

Mr. Mulley: I was trying to economise in the time of the Committee. I should have said "enthusiasm for taking steps to prevent or limit the possibilities for tax evasion." I am sorry that my shorthand fell on unaccustomed ears.
Finally, I should like to contrast this position with the Customs and Excise position, to show that we are not asking for any new principle. We are only asking for powers to be given to the Income Tax inspector that are already given to the officials of the Commissioners of Customs and Excise. If the Parliamentary Secretary will refer to the Finance Act (No. 2) of 1940, he will find, in Section 33, that the Commissioners of Customs and Excise
may make regulations …
(f) for requiring registered persons to keep accounts,
and
(h) for requiring any persons … to produce for inspection any books or accounts or other documents of whatever nature relating thereto.
I see no logical difference for distinguishing between the Inland Revenue official and the Customs and Excise official. In inspecting for Purchase Tax —the 1940 provision was in respect of Purchase Tax—they will very largely see the same books. We have it from the hon. Member for Canterbury (Mr. Baker White) that in Covent Garden, at any rate, traders have to show their books to the representative of another Minister, the Minister of Food. They show them to other people, like officials of the National Farmers' Union. Only a small majority of traders would find any objection to the provision, and they are the small majority of traders who are evading their just dues. They would only object, because the purpose of the proposed new Clause is to bring them into line with their proper assessments.
The final point is that there are certain aspects of financial affairs, such as secret reserves and the extraction fraud to which my right hon. Friend made

reference, and which can only be found —even by a qualified and enthusiastic accountant—by a full study of the original books and records. It is impossible to pick it up from accounts, and accounts are not available except after a certain amount of red tape.
I ask the Parliamentary Secretary to present a more considered view on the Clause. If he cannot accept the Clause now, can he say that by the Report stage he will come forward with something that will meet the point of view of my right hon. Friend? It is not satisfactory that he should reply early in the debate and not make any reply to later speeches.

Mr. F. Blackburn: My intervention will be brief. I only want to put one point to the Parliamentary Secretary. I think he said that these provisions were first put into the 1942 Act. I think he will agree that there is some tax evasion, and obviously therefore the machinery which we have is not satisfactory to meet the present position. Whatever the views of the Commissioners of Inland Revenue may be, we need better machinery than we have at the present time. I ask the Parliamentary Secretary to look again at the proposed new Clause, to see whether it is not possible to accept it. It would strengthen the position by making it much more difficult to evade taxation.

Mr. Maudling: I have listened with great care to the arguments put forward, and I am afraid I am not convinced by their validity. Since 1942, powers in respect of evasion have been confined to the Commissioners of Inland Revenue. It is true that there is still tax evasion, but there has been tax evasion since the beginning of time, and it will continue.
The main difficulty about checking tax evasion is the shortage of trained and experienced staff. If I believed that these powers were necessary and desirable to assist in checking tax evasion it would be different, but in the light of the arguments put forward and of the advice I have received, I do not think that the proposed powers are necessary to check tax evasion. It is most important that we should not extend the powers of the Executive over the individual, unless it can be shown that they are necessary. I cannot possibly accept the proposed new Clause.

Mr. Mulley: Why is it possible to give these powers to the Customs and Excise officials and not to those of the Inland Revenue?

Mr. Maudling: Circumstances are entirely different with the Customs and Excise.

Mr. Gaitskell: The Parliamentary Secretary's reply is totally unsatisfactory. Once again he has accepted the general case, but shows that he was not really sincere in accepting the general case by turning down perfectly good arguments on a particular proposition.

Mr. Maudling: I do not know what the right hon. Gentleman means by "not being sincere in the general case." Does he mean that I am sincere in accepting the general case that tax evasion should stop?

Mr. Gaitskell: I certainly will not withdraw my remark I meant it in the political sense. We would not wish to give the hon. Gentleman any pain or offence in a personal way. Politically, it is very insincere when, time and again, we put up proposals based on certain principles, the principles are accepted and the arguments are regarded as very sound, but the Government simply say, "No, sorry, we could not accept the proposal."
9.0 p.m.
What are the arguments that he has brought up? To start with he says it is a bad thing for the Executive to have these powers. What does he mean by the Executive? He referred later on to the Commissioners of Inland Revenue as the Executive. If the Commissioners of Inland Revenue are the Executive, they have the powers at the moment and it is simply a minor point as to how effectively one can administer this tax as to whether the Commissioners in London should have it or the local inspectors.
He cannot get away with that argument. If, on the other hand, the Commissioners are not the Executive, then he

cannot claim that their advice is particularly sound on this. For instance, has he asked the Association of Tax Inspectors what they think about this issue? Has he asked any tax inspector? My hon. Friend is perfectly right. Of course if the hon. Gentleman were to ask a tax inspector, he would say, "We would like to have these powers, they would help us a good deal." The hon. Gentleman must understand that we are not content to leave this matter of tax evasion where it is.

Mr. Maudling: Why is it only now in 1952 that the right hon. Gentleman proposes an extension of these powers?

Mr. Gaitskell: I have already explained. I should have thought that the hon. Gentleman would have done us this credit, that we put many measures to restrict tax evasion into the Bill last year. Despite a great deal of opposition from the then Opposition, we carried them through. Had more Parliamentary time been available to us, I should have wished to go further that year, but we had every intention, if we had been sitting on those benches opposite this year, of continuing with this work, which the Government have completely failed to do.
The hon. Gentleman has given no answer at all to the relevant point of my hon. Friend about the contrast with the Customs and Excise. The powers which those officers have in respect of Purchase Tax are far more sweeping and adequate. This is a relic, a bit of an antiquated system, and the hon. Gentleman and the Chancellor should look into it properly to see if they cannot improve the system of tax inspection. It is no use their talking in general terms and saying that they are in favour of stopping tax evasion if they do nothing about it. In the circumstances, we shall certainly press this matter to a Division.
Question put, "That the Clause be read a Second time."

The Committee divided: Ayes, 187: Noes, 197.

Division No. 151.]
AYES
[9.3 p.m.


Acland, Sir Richard
Benson, G.
Bowles, F. G.


Albu, A. H.
Bevan, Rt. Hon. A. (Ebbw Vale)
Brockway, A. F.


Allen, Arthur (Bosworth)
Bing, G. H. C.
Brook, Dryden (Halifax)


Anderson, Frank (Whitehaven)
Blackburn, F.
Broughton, Dr. A. D. D.


Awbery, S. S.
Blenkinsop, A.
Brown, Thomas (Ince)


Bartley, P.
Blyton, W. R.
Burton, Miss F. E.


Bence, C. R.
Boardman, H.
Callaghan, L. J.




Carmichael, J.
Hoy, J. H.
Reeves, J.


Castle, Mrs. B. A.
Hubbard, T. F.
Reid, Thomas (Swindon)


Champion, A. J.
Hudson, James (Ealing, N.)
Rhodes, H.


Chapman, W. D.
Hughes, Emrys (S. (Ayrshire)
Richards, R.


Chetwynd, G. R.
Hughes, Hector (Aberdeen, N.)
Roberts, Albert (Normanton)


Clunie, J.
Hynd, J. B. (Attercliffe)
Robinson, Kenneth (St. Pancras, N.)


Cocks, F. S.
Irving, W. J. (Wood Green)
Royle, C.


Coldrick, W.
Isaacs, Rt. Hon. G. A.
Schofield, S. (Barnsley)


Collick, P. H.
Jay, Rt. Hon. D. P. T.
Shackleton, E. A. A.


Cove, W. G.
Jeger, Dr. Santo (St. Pancras, S.)
Shawcross, Rt. Hon. Sir Hartley


Craddock, George (Bradford, S.)
Jenkins, R. H. (Stechford)
Shinwell, Rt. Hon E


Crosland, C. A. R.
Jones, David (Hartlepool)
Short, E. W.


Cullen, Mrs. A.
Jones, T. W. (Merioneth)
Shurmer, P. L. E.


Dalton, Rt. Hon. H
Keenan, W.
Silverman, Julius (Erdington)


Davies, A. Edward (Stoke, N.)
King, Dr. H M.
Simmons, C. J. (Brierley Hill)


Davies, Ernest (Enfield, E.)
Kinley, J.
Slater, J.


Davies, Harold (Leek)
Lee, Frederick (Newton)
Smith, Ellis (Stoke, S.)


Davies, Stephen (Merthyr)
Lee, Miss Jennie (Cannock)
Snow, J. W.


Deer, G.
Lever, Leslie (Ardwick)
Soskice, Rt Hon Sir Frank


Dodds, N. N.
Lindgren, G. S.
Sparks, J. A.


Driberg, T. E. N.
Logan, D. G.
Steele, T.


Ede, Rt. Hon. J C.
MacColl, J. E.
Strachey, Rt. Hon. J


Edelman, M.
McInnes, J.
Sylvester, G. O.


Edwards, John (Brighouse)
McKay, John (Wallsend)
Taylor, Bernard (Mansfield)


Evans, Albert (Islington, S.W.)
McLeavy, F.
Taylor, John (West Lothian)


Evans, Edward (Lowestoft)
MacMillan, M. K. (Western Isles)
Taylor, Rt. Hon. Robert (Morpeth)


Evans, Stanley (Wednesbury)
MacPherson, Malcolm (Stirling)
Thomas, David (Aberdare)


Ewart, R.
Mann, Mrs. Jean
Thomas, Ivor Owen (Wrekin)


Fernyhough, E.
Manuel, A. C.
Thurtle, Ernest


Field, W. J.
Marquand, Rt. Hon. H A.
Timmons, J.


Fienburgh, W.
Mayhew, C. P.
Tomney, F.


Fletcher, Eric (Islington, E.)
Messer, F.
Ungoed-Thomas, Sir Lynn


Forman, J. C.
Mikardo, Ian
Viant, S. P.


Fraser, Thomas (Hamilton)
Mitchison, G. R.
Wallace, H. W


Freeman, John (Watford)
Monslow, W.
Watkins, T. E


Gaitskell, Rt. Hon. H. T. N.
Morgan, Dr. H. B. W.
Weitzman, D.


Gibson, C. W.
Morley, R.
Wells, Percy (Faversham)


Greenwood, Anthony (Rossendale)
Morris, Percy (Swansea, W.)
Wells, William (Walsall)


Grey, C. F.
Morrison, Rt. Hon. H. (Lewisham, S.)
West, D. G.


Griffiths, Rt. Hon. James (Llanelly)
Mort, D. L.
White, Mrs. Eirene (E. Flint)


Hale, Leslie (Oldham, W.)
Moyle, A.
White, Henry (Derbyshire, N.E.)


Hall, Rt. Hon. Glenvil (Colne Valley)
Mulley, F. W.
Whiteley, Rt. Hon. W.


Hall, John (Gateshead, W.)
Murray, J. D.
Wigg, George


Hamilton, W. W.
Neal, Harold (Bolsover)
Wilkins, W. A.


Hannan, W.
Oldfield, W. H
Willey, Frederick (Sunderland, N.)


Hardy, E. A.
Oliver, G. H.
Willey, Octavius (Cleveland)


Hargreaves, A.
Oswald, T.
Williams, David (Neath)


Harrison, J. (Nottingham, E.)
Paling, Rt. Hon. W. (Dearne Valley)
Williams, Ronald (Wigan)


Hastings, S.
Pannell, Charles
Williams, W. R. (Droylsden)


Hayman, F. H.
Pargiter, G. A
Williams, W. T. (Hammersmith, S.)


Healy, Cahir (Fermanagh)
Paton, J.
Wilson, Rt. Hon. Harold (Huyton)


Henderson, Rt. Hon. A. (Rowley Regis)
Plummer, Sir Leslie
Winterbottom, Ian (Nottingham, C.)


Herbison, Miss M.
Price, Joseph T. (Westhoughton)
Woodburn, Rt. Hon A


Hewitson, Capt. M
Price, Philips (Gloucestershire, W.)
Wyatt, W. L.


Hobson, C. R.
Proctor, W. T.



Holman, P.
Pryde, D. J.
TELLERS FOR THE NOES:




Mr. Pearson and Mr. Holmes.




NOES


Aitken, W. T.
Brooman-White, R. C.
Doughty, C. J. A.


Allan, R. A. (Paddington, S.)
Buchan-Hepburn, Rt. Hon. P. G. T.
Drayson, G. B.


Alport, C. J. M.
Bullard, D. G.
Drewe, G.


Amory, Heathcoat (Tiverton)
Bullus, Wing Commander E. E.
Duncan, Capt. J. A L


Anstruther-Gray, Major W. J
Burden, F. F. A
Duthie, W. S.


Arbuthnot, John
Butcher, H. W.
Elliot, Rt. Hon. W E


Ashton, H (Chelmsford)
Butler, Rt. Hon. R. A. (Saffron Walden)
Erroll, F. J.


Assheton, Rt. Hon. R. (Blackburn, W.)
Carr, Robert (Mitcham)
Fell, A.


Astor, Hon. W. W. (Bucks, Wycombe)
Carson, Hon. E.
Finlay, Graeme


Baker, P. A. D.
Cary, Sir Robert
Fisher, Nigel


Baldock, Lt.-Cmdr. J. M
Channon, H.
Fleetwood-Hesketh, R. F


Baldwin, A. E.
Clarke, Col. Ralph (East Grinstead)
Fletcher-Cooke, C.


Banks, Col. C.
Cole, Norman
Gage, C. H.


Barber, A. P L
Conant, Maj. R. J. E.
Galbraith, Cmdr. T. D. (Pollok)


Baxter, A. B.
Craddock, Beresford (Spelthorne)
Galbraith, T. G. D. (Hillhead)


Beach, Maj. Hicks
Crookshank, Capt. Rt. Hon. H. F. C.
Garner-Evans, E. H.


Bennett, Sir Peter (Edgbaston)
Crosthwaite-Eyre, Col. O E.
Godber, J. B.


Bennett, Dr. Reginald (Gosport)
Crouch, R. F.
Gomme-Duncan, Col. A


Bevins, J. R. (Toxteth)
Crowder, John E. (Finchley)
Gower, H. R.


Birch, Nigel
Crowder, Petre (Ruislip—Northwood)
Graham, Sir Fergus


Bishop, F. P.
Darling, Sir William (Edinburgh, S.)
Gridley, Sir Arnold


Black, C. W.
Deedes, W. F.
Grimond, J.


Boyd-Carpenter, J. A.
Dodds-Parker, A. D
Grimston, Hon. John (St. Albans)


Boyle, Sir Edward
Donaldson, Cmdr. C. E. McA.
Grimston, Sir Robert (Westbury)


Braithwaite, Lt.-Cdr. G (Bristol, N.W.)
Donner, P. W.
Harris, Reader (Heston)







Harrison, Col. J. H. (Eye)
Macpherson, Maj Niall (Dumfries)
Russell, R.S.


Harvey, Ian (Harrow, E.)
Maitland, Patrick (Lanark)
Ryder, Capt, R. E. D.


Harvie-Watt, Sir George
Manningham Buller, Sir R. E.
Salter, Rt. Hon. Sir Arthur


Heald, Sir Lionel
Marshall, Douglas (Bodmin)
Schofield, Lt.-Col. W. (Rechdale)


Higgs, J.M.C.
Marshall, Sidney (Sutton)
Scott, R. Donald


Hill, Dr. Charles (Luton)
Maude, Angus
Shepherd, William


Hill, Mrs. E. (Wythenshawe)
Maudling, R.
Simon, J. E. S. (Middelesbrough, W.)


Hinchingbrooke, Viscount
Maydon, Lt.-Comdr. S L C
Smithers, Peter, (Winchester>


Hirst, Geeffrey
Medlicott, Brig. F.
Snadden, W McN


Holland-Martin, C. J
Meller, Sir John
Speir, R. M.


Hernsby-Smith, Miss M. P
Monckton, Rt. Hen. Sir Walter
Stevens, G P.


Horobin, I. M.
Nabarro, G. D. N.
Storey, S.


Howard, Gerald (Cambridgeshire)
Nicholls, Harmar
Strauss, Henry (Norwich, S.)


Howard, Greville (St. Ives)
Nicholson, Godfrey (Farnham)
Studholme, H. G.


Hulbert, Wing Cmdr. N.J.
Nicolson, Nigel (Beurnemouth, E.)
Sutcliffe, H.


Hutchison, Lt.-Com. Clark (E'b'rgh W.)
Nield, Basil (Chester>
Tayler, William (Bradford, N.)


Jenkins, R. C. D. (Dulwich)
Noble, Comdr, A. H. P.
Thomas, Rt. Hon. J. P. L. (Hereford>


Jennings, R.
Nugent, G. R. H
Thomas, P. J. M. (Conway)


Johnson, Erie (Blackley)
Oakshott, H. D.
Thompson, Kenneth (Walton)


Johnson, Howard (Kemptown)
Odey, G. W.
Thompson, Lt,-Cdr, R. (Croydon, W)


Jones, A. (Hall Green
O'Neill, Rt. Hen. Sir H. (Antrim, N.)
Theroneycroft, Rt. Hn. Peter (Monmouth)


Jeynson-Hicks, Hon. L.W.
Ormsby-Gore, Hon. W. D.
Turner, H. F. L


Kaberry, D.
Orr-Ewing, Charles Ian (Hendon, N.)
Turton, R. H.


Keeling, Sir Edward
Osberne, C
Vesper, D. F.


Lambert, Hon. G.
Partridge, E.
Wakefield, Edward (Derbyshire, W)


Lancaster, Col. C. G.
Peake, Rt. Hon. O.
Ward, Miss I. (Tynemouth)


Langford-Holt, J. A.
Perkins, W. R. D.
Waterhouse., Capt. Rt. Hon. C.


Law, Rt. Hon. R. K.
Peto, Brig. C. H. M
Walkinson, H. A.


Legge-Bourke, Maj. E. A. H.
Pickthorn, K. W. M.
Wellwood, W.


Legh, P. R. (Petersfield)
Powell, J. Enoch
White, Baker (Canterbury)


Linstead, H. N.
Price, Henry (Lewisham, W.)
Williams, Rt. Hon. Charles (Terquay)


Lloyd, Maj. Guy (Renfrew, E.)
Profumo, J. D.
Williams, Gerald (Tonbridge)


Lloyd, Rt. Hon. Selwyn (Wirral)
Raikes, H. V.
Williams, Sir Herbert (Croydon, E.)


Longden, Gilbert (Herts, S.W.)
Rayner, Brig. R.
Williams, R Dudley (Exeter)


Lucas, Sir Jocelyn (Portsmouth, S.)
Remnant, Hon. P.
Wills, G.


Lucas, P. B. (Brentford)
Renton, D. L. M
Wilson, Geoffrey (Truro)


Lucas-Tooth, Sir Hugh
Roberts, Peter (Heeley)
Wilson, Geoffrey (Truro)


McCorquodale, Rt. Hon. M. S.
Robinson, Roland (Blackpool, S.)
York, C.


Macdonald, Sir Peter (I. of Wight)
Robson-Brown, W.



Mackeson, Brig. H. R.
Rodgers, John (Sevenoaks)
TELLERS FOR THE NOES:


McKibbin, A. J.
Roper, Sir Harold
Mr. Heath and Mr. Redmayne.


Macleod, Rt. Hon. Iain (Enfield, W.)
Ropner, Col. Sir Leonard

New Clause.—(TAX IN ARREAR BY REASON OF EXCHANGE RESTRICTIONS.)

Subsection (1) of section four hundred and ninety-seven of the Income Tax Act, 1952 (which relates to the remission in certain cases of interest on tax in arrear by reason of exchange restrictions), and subsections (1) of section forty-one of the Finance Act, 1950, shall he repealed and the following subsection shall he substituted for subsection (1) of section four hundred and ninety-seven of the Income Tax Act, 1952:#x00A3
(1) Where the Commissioners of Inland Revenue are satisfied as respects any tax carrying interest under section four hundred and ninety-five of this Act and section eight of the Finance (No. 2) Act, 1947, as amended by section fifty-three of the Finance Act, 1952.

(a) that the tax is in respect of income arising in a country outside the United Kingdom; and
(b) that as the result of action of the Government of that country it is impossible for the income to be remitted to the United Kingdom

the Commissioners shall allow the tax to remain uncollected accordingly."—[Mr. G. Wilson.]

Brought up, and read the First time.

Mr. Geoffrey Wilson: I beg to move, "That the Clause be read a Second time."
I have deliberately not spoken often in the debates on the Bill because, if I may say so without any intention of arrogance, it seems to me that in the broad picture the Bill is the best that can be done under present circumstances; and many of the Amendments, while no doubt desirable from the point of view of various groups of constituents, would throw out of perspective the general picture of the Bill. The new Clause certainly would not do that.
Hon. Members will observe that the Clause is, in effect, a re-enactment of Section 497 of the Income Tax Act, 1952, without subsection (1, c). The circumstances why, I submit, it is necessary to make this amendment are these. As hon. Members are well aware, for a number of years remittances of profits earned abroad have been very severely limited or delayed in many countries owing to exchange shortages and regulations. British tax, however, is charged on all foreign profits, even if they are not remittable, with the result that when, as is generally the case, profits in restricting countries considerably exceed the permitted remittances, the tax on unremit-


table earnings must be found out of remittances from countries which are free, or from sterling resources.
That has most unfortunate results. Any business operating abroad, especially in a number of different countries, must keep adequate resources where they are freely transferable, to be used as need arises; and a company which is conducting an export business must keep a substantial working capital in London in order to finance its export purchases in the United Kingdom over the time lag, which may often be considerable, before it is reimbursed by its overseas buyers.
The effect of draining away the working capital from export trade is quite obvious and the effects of the present United Kingdom tax legislation must be eventually to exhaust trading resources and reserves and sterling in London, and even currency reserves in free countries; and it must result in the concentration of them in the form of blocked profits in countries where they are immobilised. It would be dangerous, if not impossible, in these circumstances for those concerns to carry on.
9.15 p.m.
So we get the absurd position, which now obtains, that the more successful a British concern is in developing its business in restricting countries, and thereby assisting United Kingdom trade and invisible exports, the sooner it will exhaust its sterling resources and its transferable reserves and have to go into liquidation.
That is a most ridiculous situation, and there are only two things that such a company can do about it. The first is to form subsidiary companies, so that only those earnings which are declared for dividend would be subject to United Kingdom tax; but this would mean placing effective control abroad, and reducing potential British invisible exports and British influence in those countries. This, therefore, would be undesirable in the national interest.
The other thing that a company might do in such circumstances is to reduce its business in the restricting countries to the point where the profits are no greater than the permitted remittances. That, also, would be most undesirable from the national point of view, because business once refused is difficult to recover, and

the British trade in visible and invisible exports and prestige would be diminished in the process. That form of action would be particularly bad if it was undertaken by British overseas banks, because such reductions in business would only operate against British trade generally, which is financed and facilitated by British banks abroad.
There is, however, a third way of meeting the difficulty. That would be to tighten up the existing law, which is what the Clause proposes should be done. This problem is certainly not new. There have been restrictions on remittances of one sort and another ever since the financial crisis of 1930-31, but it has not become so acute until fairly recently, from 1946 onwards, when the situation has become increasingly critical owing to the simultaneous factors of inflation abroad and larger currency earnings, together with increasingly severe restrictions on remittances of profits, whether due to foreign exchange, shortage, or to Government legislation.
The two Sections which are mentioned in the Clause—Section 497 of the Income Tax Act, 1952, and Section 41 of the Finance Act, 1950—did set out to meet this difficulty, and they provided that where the Commissioners of Inland Revenue were satisfied that tax in respect of income arising in a country outside the United Kingdom, as a result of action of the Government of that country was impossible to be remitted, and having regard to all the other circumstances of the case, it was reasonable that the tax should for the time being remain uncollected, the Commissioners allowing it to remain uncollected accordingly. The provision in both Sections is the same. The difficulty arises, as in so many statutes, when one comes to interpret the word "reasonable."
The Commissioners of Inland Revenue, apparently, do not think it reasonable to allow the tax to remain uncollected as long as there is anything at all to collect from any source whatever, and so long as any source remains from which it can be extracted. Although, for the reasons I have stated, the payment of the tax from working capital in this country is most undesirable in the national interest as reducing sterling resources, that is at present being done and is having a detrimental effect on British trade.
All that the Clause proposes to do is to make mandatory that permissive power of the Commissioners of Inland Revenue. This seems to me to have five advantages. It does not involve any major change in the tax code. It does not deprive the Inland Revenue of their claim on profits when remittances are received. It creates no new loophole for evasion, because the position in this respect is not altered. It can only be applied when the Inland Revenue are satisfied that the profits in question are impossible to be remitted.
Finally, it would be a great help to British trade, and especially to the present trade in South America, which is beginning to suffer heavily from competition from the Germans and the Japanese, and also from the U.S.A., none of whom have tax of a similar kind to our own so that their traders have a definite advantage.

Mr. Peter Smithers: I support this Clause because it seems to me that the practice of the Revenue authorities is inequitable and doing real harm to our trade, particularly in the markets where we sell manufactured goods. Apparently the view of the Revenue is that when profits are earned in a foreign currency, even if they cannot be collected by the body which earns them, nevertheless they are part of the income of that body, and ought to bear tax.
From what has been said by my hon. Friend the Member for Truro (Mr. G. Wilson) it will be apparent to the Committee that one arrives at a position where a company may be earning money, say in Brazil, which it is unable to send home to this country in the form of profit: therefore, it must use up its resources in this country to pay tax while piling up useless money in Brazil. As a result it soon finds itself without working capital. That is not only inequitable to the people who are entitled to their fair share of the profits, but it also must have a very bad effect upon our trade.
If we look at the pattern of trade in Latin America, to which this Clause is especially directed, we see our principal markets are the Argentine and Brazil. It is those two countries which restrict the sending home of profits, the Argentine to 5 per cent., and in Brazil to 8 per cent. of the nominal capital. Therefore, a quite serious blow is dealt

to our trade with those countries. The Inland Revenue say, "We examine every case on its merits, and in hard cases we make allowances." But the practice of the authorities has rendered that concession valueless, because what in fact they do is to wait until there is little prospect of collecting any more revenue at all and then make the concession.
Naturally, by that time the company concerned is in serious difficulty when it comes to competing with foreign companies. If one looks at the pattern of trade in Latin America, one sees that whereas most countries are increasing their sale of manufactured articles—Germany, for example, on a great scale, and the United States and other European countries—Britain lost 10 per cent. of the volume of her exports to Latin American countries last year. One of the principal reasons for that is because British firms are not able to offer credit terms in the Latin American market comparable with those which can be offered by more fortunately placed foreign competitors.
The object of this Clause is to make it mandatory to the authorities to collect tax only on those profits which can be remitted to this country and to satisfy themselves as to the genuineness of the difficulty which confronts the company in question. While, on the one hand, equity is aimed at and the Clause is designed to assist our traders in competing with their foreign rivals, on the other hand a safeguard is provided which requires the authorities to use the machinery at their command to satisfy themselves that abuse is not taking place

Mr. L. M. Lever: May I put this proposition to the hon. Member? I understand he is suggesting that until the moneys which have been earned in foreign countries come into the hands of the traders in this country they should not be taxable. Is that his proposition?

Mr. Smithers: No. What I am saying is that they should not be taxable until the traders are able to remit them home.

Mr. Lever: The hon. Member wants the British Revenue to suffer until the moneys can be remitted home. Yet it would be perfectly possible for a trader here to visit a country there and use part


of that money as his expenses in relation to the business, and, when he comes back, charge it against the accounts of his company as a business expense, and therefore reduce taxation in that way.

Mr. Smithers: I do not think that could happen on a large scale. I think the hon. Member would agree that such evasions must be quite small. It is with that fact in mind that we have put in this mandatory requirement—

Mr. Lever: But is it possible?

Mr. Smithers: Almost everything is possible. That is why we have put in this mandatory requirement on the Revenue authorities to satisfy themselves.
The objection of the Government, in the first place, is, I believe, that an alteration of this kind would be expensive to the Revenue, as the hon. Member for Ardwick (Mr. L. M. Lever) has just been suggesting. I do not think it would, because the present practice is for the Government to make concessions in certain cases of absolute necessity and there really is very little margin left between those cases where a concession is made and those cases where it is not. The figure must be quite small.
It is said that there is a difficulty in assessing a tax on something less than the profit actually made. That idea arises from an obsolete view of currency matters to hold that profits in a blocked currency in Latin-American countries are equivalent to profits in sterling or in freely remissable currency seems quite out of touch with conditions in the modern world today. It is no use anyone deluding themselves that these Latin-American currencies will become more convertible or more readily remissable than at present.
The third objection to this Clause is that these matters are now before the Royal Commission on Taxation. But German manufacturers will not wait until the Report of that Royal Commission is made. It really is important in the interests of our manufacturers and those who work for them that this matter should be considered at an early date. All who know Latin America will be concerned at the difficulties which our trade faces there; not only the ordinary hazards of trade together with heavy taxation in

this country, but on top of that this device, which means that it is not merely undesirable but foolish and dangerous to extend one's trade or to make a good profit.
I ask the hon. Gentleman to look very carefully at this matter and if he is not able to make a concession to us today I hope he will examine his Department as to the wisdom of their policy. So far as I can see it appears to be inequitable to those in the trades concerned and shortsighted in so far as it concerns the export interests of this country.

Mr. Horobin: 1 wish to support what has been said, but, first, I would dispose of what I am perfectly sure was an unintentional misunderstanding on the part of the hon. Member for Ardwick (Mr. L. M. Lever). There is no substance in his point, because if these allowances were duly to be made in reduction of Income Tax liability they could be made now. So there is no substance in his fear.

9.30 p.m.

Mr. L. M. Lever: If the currency of the country which it is proposed shall remain untaxed could be remitted here, that currency would have to be sold to the Government.

Mr. Horobin: The whole point is that it cannot be remitted. Therefore, I do not think that we need go further into that matter; there is no substance in it.
This is really an important question which concerns banking even more than productive industry. The point cannot be too clearly made that there is no question of remission or reduction of tax. There is no dispute about the profits or the tax liable upon them. That is not what is before the Committee. The question arises because in the world as we know it a good many profits are now being earned in countries from which they are, through no fault of the firm or of the Government, not remitted.
Yet, under our tax law, the total liability to tax on the agreed profits is taken from those moneys available to those companies in London. It is that difficulty to which we must address ourselves. Important as it is in many well established productive industries, it has even more effect where it occurs in banking and financial transactions. That is because a large company doing business in one of these countries probably does


a large amount of business here or in parts of the world from which it can claim the profits which it has earned. Therefore, the proportion of the drain upon its free resources, if I may so describe them, though inequitable, is not so likely in most cases to be serious.
But in banking transactions the situation can be quite fantastic. The amount of the earnings in this country, in a head office, for instance, can be completely negligible. A large proportion of the earnings, rightly subject to tax, will be found in the countries from which they cannot be remitted. As long as the present Inland Revenue interpretation of their discretion continues, we shall inevitably get the position that exactly those institutions which we all agree should keep themselves liquid, and who should have funds available for any calls upon them in any part of the world, will find themselves more and more in the position that all their resources are tied up
in the unremittable areas. The total demands upon them for taxes can only be obtained out of that small section which is freely disposable from one area to another.
That is a simple proposition which presents a real difficulty. I do not think it will be disputed by the Front Bench that it is a serious difficulty. The more these unpleasant habits of preventing the remission of moneys grow, the more serious will be the position of that vital section in which London still has a preeminence in the whole world: banking and similar financial activities. More and more they run themselves into the danger that if they continue these legitimate and important activities upon which so many of our invisible exports depend, and more and more they will be forced into the position of saying, "Dare we be successful?" or, "Dare we run ourselves into the position that we are getting our funds tied up and are ceasing to be liquid as we should be?"
There is no question of the total tax liability. We are not asking for any reduction or remission or anything else. All that is suggested is that where these moneys, through no fault of anybody in this country, cannot be brought into this country and be made available, the tax should remain uncollected and that it should be collected as soon as the money is available. It seems to me a self-evidently equitable proposition which

should have the support of all those who wish to see our commercial strength all over the world continued.
I hope that whoever replies to this debate will either accept this Clause or at least say that he will look into the present custom of the Inland Revenue in the interpretation of their discretion.

Mr. Maudling: This is undoubtedly a serious problem, to which my right hon. Friend has directed his attention. I have listened with a great deal of interest to what has been said by my hon. Friend. The problem is roughly this: that a company which operates abroad, not through a subsidiary but through a branch, is taxed by the British Inland Revenue on its profits, whether or not those profits can be remitted to this country. Objections are raised to that both on practical grounds and on grounds of principle.
It is pointed out that it may cause a company great difficulties if its London balances are being drawn on by taxation while profits which it cannot use are piling up abroad. That is the practical point. The point of principle is whether it is right to tax the United Kingdom taxpayer on moneys which do not come within his control and which he cannot use in this country. Those are the two main points behind this new Clause.
This matter has been raised on previous occasions. It was raised in this Committee two years ago on a new Clause moved by myself, to which a reply was given by the right hon. and learned Member for Sheffield, Neepsend (Sir F. Soskice). The Government were then good enough to introduce a concession in the law which this new Clause seeks to extend. Broadly speaking, the position now is that if the Commissioners of Inland Revenue are satisfied that profits cannot be remitted to this country by reason of exchange restrictions, and, also, if they are satisfied, taking into account all the circumstances, that it is reasonable, they have the power to let that amount of taxation remain uncollected.
It may be argued that that does not meet in full either the practical point or the point of principle. I have taken note of what my hon. Friends have said about the way in which this is, in practice, being administered by the Revenue authorities.


So far as the matter of principle is concerned, there is a strong argument, but I must point out that to make any change in this matter would involve considerable repercussions over the whole subject of the taxation of overseas income and overseas profits. The matter was considered by the Millard Tucker Committee. This is what they say:
… we do not think that either of these points, important as they are, are within our terms of reference. … Both are matters "—
Those were the two points I have mentioned—
which are more proper to be considered by the Royal Commission.
I am advised that this problem is being considered now by the Royal Commission. In these circumstances, I say to my hon. Friends that it seems to the Government better to await the Report of the Royal Commission on what is a most tangled, complicated and, I readily admit, extremely important matter before any action of any kind is taken, or before a decision is taken. While I hope that I have said enough to indicate that the Government recognise that there is a point here, and that we have studied it carefully, I ask my hon. Friend to await the Report of the Royal Commission on a matter which is pre-eminently one on which the advice of that expert body will be of great assistance.

Mr. Horobin: Did I understand my hon. Friend to say that, while awaiting the Report of the Commission, which may be some time, he will look into the possibility of perhaps loosening up the actual practice of the Department?

Mr. Maudling: I am sure that my right hon. Friend will be very ready to look into any point which has been put forward by my hon. Friend.

Mr. Douglas Jay: Is it not a fact that what the new Clause suggests is substantially in accordance with actual present practice in the Inland Revenue under the present Government? [HON. MEMBERS: "No."] If not, to what extent does it go beyond that?

Mr. Maudling: There is quite a difference. At the moment, the test is one of hardship, and this means the ratio between the company's resources in this country and its resources abroad. If the company has a lot of money in this country and the profits concerned in the company overseas which are unremittable are smaller in relation to its London balance it is not considered a case of hardship, and the tax is only allowed to remain uncollected where a case of hardship exists. I think that my hon. Friends consider this not as a matter of hardship, but as one of principle.

Mr. Smithers: Does my hon. Friend appreciate that, by the time the hardship occurs, damage to the trading potentiality of the concern is already inevitable?

Mr. Wilson: In view of the statement made by my hon. Friend, I shall ask the leave of the Committee to withdraw the Motion. I hope, however, that the attention of the Commissioners of Inland Revenue will be drawn to the practical difficulties which are arising from a too strict interpretation of hardship. I pointed out earlier that it is largely in the interpretation of the word "reasonable" that the practical difficulties arise in trade, particularly in trade with South America, and that is a matter of some concern. I beg to ask leave to withdraw the Motion.
Motion and Clause, by leave, withdrawn.

New Clause. —(AMENDMENT OF S. 15 OF FINANCE ACT, 1948.)

Section fifteen of the Finance Act, 1948 (which imposes a licence duty on bookmakers operating at a dog race meeting, at which a totalisator is operated), shall have effect as if for the Table in subsection (1), there were substituted the following Table: —


TABLE


For a course where the public is admitted to
A licence authorizing the bookmaker to carry on bookmaking in
Amount of duty on the licence


1.
2.
3.
4.


A single enclosure
The enclosures
…
£6
Where there are to be more races than eight at the meeting an additional amount of one-eighth of the amount in the third column for each race in excess of eight.


Two enclosures and no more.
The cheaper enclosure …
…
£3


The dearer enclosure …
…
£12


More than two enclosures
The cheapest enclosure
…
£3


The cheapest but one enclosure
…
£9


Any other enclosure …
…
£24

Brought up, and read the First time.

Captain M. Hewitson: I beg to move, "That the Clause be read a Second time."
I think that today is a very appropriate day for the discussion of this new Clause. This afternoon we had the greatest event that takes place in a line of sport which is sometimes called the sport of kings, but tonight I am attempting to move the heart of the Chancellor in the hope that he will give some concession to a sport that I would call the sport of the common man.
Each year, since this duty was imposed, I have consistently opposed it during the Committee stage of the Finance Bill, so that my intervention tonight is nothing new, but is merely carrying on a battle which was started when the duty was imposed.
For many years, bookmakers have been subjected to unjust criticism and Governmental action, and the duty that was imposed upon bookmakers' licences in 1948, or on certain sections of them operating on dog tracks, has been very heavy, and has put out of business very many bookmakers. Their numbers have been reduced from approximately 3,500 to fewer than 2,000—operating on dog tracks.
When that duty was imposed, my right hon. Friend the Member for Colne Valley

(Mr. Glenvil Hall), who, at that time, was Financial Secretary to the Treasury, said:
…it is quite wrong for the bookmakers to assume that the Tax is to come out of their present profits. The Duty is directed at the Betting Public and designed to ensure that Bookmakers operating on Greyhound courses shorten their odds by the 10 per cent., which has already been imposed on the Tote. The level of the Tax has been calculated very carefully with this end in view, and we think that the sums laid down are just about right fey the purpose which we have in mind."—[OFFICIAL REPORT, 6th May, 1948; Vol. 450, c. 1469.]
9.45 p.m.
The purpose which the Chancellor had in mind at that time was that the duty upon the totalisator would bring in about £10 million per annum, and, by imposing a duty worked out on a 50 per cent. basis, it would bring in from dog track bookmakers somewhere in the neighbourhood of £5 million per annum. The whole of that assumption has proved wrong. Never at any time has the duty imposed brought in anything like the figure that was estimated, and, as my right hon. Friend has suggested that the odds could be shortened, I would suggest that we ought to look for a moment at the mechanics of betting on dog tracks.
On a dog track, there are six boxes and six dogs. Three of the dogs are within the betting range with the public money


going on them either to one or two dogs out of the three selections. How could a bookmaker start calculating how to cut the odds to fit in with the public mind on betting? I would refer hon. Members to their own ideas on betting in the last few days and to the result this afternoon, and would recommend them to reckon up their losses and profits.
The bookmaker, in cases like this, has to make a gamble, and, although my right hon. Friend suggested a levy on betting, can one visualise for a moment the case of a man making a bet with a bookmaker? Let us suppose that he has won £1 at the odds given, and that he goes to see his bookmaker, who tells him, "The kind Government has placed a 20 per cent. tax on this, so that your winnings are not £1, but 18s., and the Government gets the other 2s."What would happen to the bookmaker? The people who go to dog tracks are probably not so gentle as the people who patronise the sport of kings, and the bookmaker would promptly be knocked off his box.
The whole idea of collecting the tax from the general public by the bookmaker by some means or other was wrong. The bookmaker himself has to pay taxes, and when one looks at the range of the taxation on his licence from £5 to £48 per meeting, one can see that the taxation imposed here is very unjust and is out of proportion to all other ranges of taxation.
The argument that was used by my right hon. Friend at that time that this tax was to give equity with the Tote prompts me to ask that some measure should be used to give equity with the Tote. Tote taxation has dropped more than 40 per cent., and, to keep the thing on some level, if some concession was made on the previous argument of equity with the Tote, I think that would meet our case.
This taxation has been very harsh, and I should like to read to the Committee a letter from a man who has been put out of business. Bookmakers, like other people have to work for their living. [Laughter.] Hon. Members may laugh, but even we Members of Parliament say we work. Bookmakers have a trade union, and, to be members of that union, certain guarantees have to be given of integrity and honesty. Any man who becomes a member of that union is entitled to wear a badge, which will show

immediately to the betting public that he has been accepted by this trade union or bookmakers' organisation, and that, by betting with him, their money is safe; and that counts for a lot with the betting public.
Let me read the letter to which I have referred. This man had gone out of business and they were asking him to return his badge. He wrote:
Enclosed badge as requested. 1 had intended forwarding my last year's subscriptions before now but as you will be aware 90 per cent, of my betting has been on the dog tracks and I cannot stand this crippling betting tax the late Government imposed. At Wakefield I have paid £1,150 tax to earn myself £7 10s. and at Parkside I have paid over a thousand pounds tax to earn forty pounds. The bookmakers stop no tax from the punter on either of these tracks. One or two of us have had meetings to try and get the tax stopped from the public but to no purpose. Thanking you for past favours"—
[Laughter.] He is not writing to me. He is writing to the secretary of his trade union. Although my own organisation caters for all types of working people from archbishops to grave diggers, we do not yet cater for bookmakers—
Thanking you for past favours and I know how you opposed the tax as an association in every way that you could but the odds were too heavy. I remain, yours truly.
That letter, although it causes some hilarity, embodies a tragedy, for this is a man who is going out of business, whose living has been taken away. [Interruption.] I think some hon. Member said "Good." I suppose that. must be the reaction of a Non-conformist mentality.
As to the mathematics of this tax, in the £48 ring—that is a man who has to pay £48 before he takes a penny bet—taking the ordinary run of dog meetings—six a week—that man has to pay over £4,000 per annum in tax before he takes a penny. That tax is unjust and requires some adjustment. We are not asking for the abolition of the tax. It may be argued that we have had a Betting Commission. that that Commission has made certain findings, and that at some time a White Paper or some form of legislation will be introduced covering the whole question of betting.
But I suggest it is wrong to wait until then. All we are asking for is common British justice, to remove something that was not really intended and which has been proved to be a failure from the very beginning. Tonight we ask that the Financial Secretary will give to dog track


bookmakers the same taxation level as is imposed upon the totalisator.

Wing Commander Eric Bullus: The effect of this new Clause would be to halve the existing duty, and while I am sure that in all parts of the Committee there is sympathy with the case of the hon. and gallant Member for Hull, Central (Captain Hewitson), against discriminatory taxation, I feel that if the Chancellor does consider this proposal to amend the Finance Act, 1948, he should consider at the same time the 10 per cent. Pool Betting Duty which is peculiar to greyhound totalisators.
This new Clause was conceived after the 10 per cent. Betting Duty, and therefore I maintain that the 10 per cent. Betting Duty has an equal claim to be considered with this new Clause. I trust, therefore, that the Financial Secretary will consider the 10 per cent. duty.

Mr. Boyd-Carpenter: As the hon. and gallant Member for Hull, Central (Captain Hewitson) said, this is a very appropriate day on which to discuss a topic of this sort. As my hon. and gallant Friend the Member for Wembley, North (Wing Commander Bullus) has pointed out, this new Clause has the merit of complete simplicity. It aims at halving the various rates of licence duty upon bookmakers at dog tracks. I have had an opportunity of meeting a deputation on this subject, and that and the hon. and gallant Gentleman's speech have given us the fullest opportunity to go carefully into this matter. It is our desire, in imposing the very burden of taxation which generally has to be imposed upon the community today, to ensure that that burden falls as fairly as possible between one section of the community and another.
I think the only point that arises is whether this burden of licence duty is so out of line with other taxation as to justify giving it reconsideration. As the Committee has been reminded, this duty was imposed by the late Government in the Finance Act, 1948, as a deliberate counter-balance to the duty placed upon the totalisator at the dog tracks. Indeed, that is evidently the case, because bookmakers only pay this duty in respect of their operations on tracks where there is a totalisator. In the case of those small tracks where there is no totalisator, there is no duty imposed upon the book-

maker who practices his profession there. Therefore, I think it is a fair inference that what was intended was to give fair betting so that neither the totalisator nor the bookmaker should gain because of the tax imposed upon the other.
That was a perfectly fair and reasonable approach to the problem, but of course it inevitably involves the factor which my hon. and gallant Friend the Member for Wembley, North mentioned —that it is very difficult to consider one at this stage without considering the other, because the aim undoubtedly was that these two rates should balance, and I have no doubt that considerable care was taken in making the calculation. Of course, it is a difficult calculation, because we are weighing on the one hand a tax on turnover, which is the way the tax falls upon the totalisator, with a lump sum licence duty for each evening's work, which is the way the tax falls upon the bookmaker.
In view of what the hon. and gallant Member for Hull, Central has said as to the decline in betting and the fact that the yield of the tax has not justified the anticipation which were held when it was introduced, I think it is material to look at what has happened to both sides of the tax—that is to say both aspects of betting upon dog tracks—because it is only in that way that one can satisfy oneself whether or not the two taxes are keeping roughly in parallel.
10.0 p.m.
It is undoubtedly the fact that the yield of both taxes—the yield on the totalisator and the yield on the bookmakers' licence duty—has disappointed the expectations of the late administration when they introduced them. It is the fact that in both cases the yield of the tax has tended to fall, but what is, I think, important in this connection is to note the way in which the fall in the yield of the tax has kept very substantially in parallel.
For example, in the year 1949-50 the yield from this tax, the bookmakers' licence duty, was £2,620,000, against a yield from the tote of £8,223,000; in the year 1950-51 the bookmakers' licence duty fell to £2,103,000, whereas the yield from the tote fell to £6,770,000; in the year 1951-52 the bookmakers' licence duty fell to just under £2 million, while that on the tote fell to just above £6,500,000.


So the Committee will appreciate that the fall has been very much in parallel, and that the proportions have remained substantially the same.
That, I would submit to the Committee, indicates that there is not any real disparity in the way the tax has operated, and that its diminishing yield in both cases is probably attributable to the general fall in surplus spending which, in fact, has affected all forms of betting in recent years, with the curious exception of the football pools, which had a slight revival towards the end of last year. That does seem to indicate, I am bound to say, that the tax was originally assessed fairly as between the two forms of betting on dog tracks, and we should, therefore, 1 think, be very careful in considering any suggestion of altering the relationship of the one with the other.
Of course, I entirely agree with the hon. and gallant Gentleman the Member for Hull, Central that it is a very serious thing that any man should lose his job, and I certainly would not join in any laughter in hearing of any incident of that sort, and it is the fact—and the hon. and gallant Gentleman is perfectly entitled to take advantage of it—that the number of bookmakers on dog tracks has diminished—substantially, I think, to the degree which the hon. and gallant Gentleman indicated. However, there are, of course, one or two things we must bear in mind.
I think it is the case that most of the reduction has been in the case of part time or casual bookmakers, and I think it is also the case that some of them have not given up bookmaking as an occupation, but have practised that trade in connection with some other sort; and, therefor, though I do not underrate the importance of these men's jobs—I am far from doing that—I think we must have a certain sense of proportion in looking also at that aspect of the matter.
As to the cost of the proposal, the cost of this new Clause as it stands would be almost exactly £1 million a year. That is a substantial item, but the further complication inevitably arises, to which I have already referred, that if we were to do as the hon. and gallant Gentleman suggests, and halve the rate of this duty, there would be a very strong case for making something of a similar reduction in the

duty upon the Tote. If that were done there would be a further additional cost to the Exchequer of, so far as we can calculate, something between £3 million and £4 million a year.

Captain Hewitson: The new Clause relates to bookmakers on dog tracks and has nothing to do with the Tote.

Mr. Boyd-Carpenter: The hon. and gallant Gentleman is quite right—there is nothing on the Order Paper on that point, but the fact that there is nothing on the Order Paper on that point really does not entitle hon. Members to dismiss from their minds what would be the logical consequences of taking this step which the hon. and gallant Gentleman is asking.
Here we have a case of two duties deliberately assessed so as to keep a fair balance between the one and the other. If we are going, as the hon. and gallant Gentleman suggests, to halve one, it really is a little unrealistic to dismiss from our minds the possibility—the probability—that we should be faced with a strong and not unjustifiable demand for taking the same action with respect to the other duty. Governments in the past have gone out of their way to link the two, and, indeed, it is a matter of obvious common sense.
Hon. Members cannot dismiss from their minds the effect upon the tote duty of taking this step with regard to the licence duty. If we are looking at this as a responsible Committee we are forced to look at it from the point of view that we are talking of a possible loss to the Exchequer of between £4 and £5 million a year, and I am afraid that in the present state of our economy that is the kind of figure which it is really not possible to contemplate.
I shall not enter into a controversy as to whether, if the money were available, it would be best given in respect of a reduction in duties upon betting—that is a matter on which hon. Members may have legitimate doubts—but it seems quite impossible in our present state of affairs to make a concession of this size with respect to the Betting Duty. Therefore, persuasively as the hon. and gallant Gentleman has put his case—I can assure him that he has said everything that can be said on the point—I am afraid that it is not possible for us to yield to his request.

Captain Hewitson: I beg to ask leave to withdraw the Motion.

New Clause.—(AMENDMENT OF RATES OF ESTATE DUTY.)

The Seventh Schedule to the Finance Act, 1949, shall be replaced by the following Schedule:—


"GENERAL SCALE OF RATES OF ESTATE DUTY


Principal Value of Estate







Rate per cent. of Duty




£

£






Not exceeding
2,000
…
Nil



On each pound of that part of the estate exceeding
2,000
but not exceeding
3,000
…
1



On each pound of that part of the estate exceeding
3,000
but not exceeding
5,000
…
2



On each pound of that part of the estate exceeding
5,000
but not exceeding
7,500
…
3



On each pound of that part of the estate exceeding
7,500
but not exceeding
10,000
…
4



On each pound of that part of the estate exceeding
10,500
but not exceeding
12,500
…
6



On each pound of that part of the estate exceeding
12,500
but not exceeding
15,000
…
8



On each pound of that part of the estate exceeding
15,000
but not exceeding
17,500
…
10



On each pound of that part of the estate exceeding
17,500
but not exceeding
20,000
…
12



On each pound of that part of the estate exceeding
20,000
but not exceeding
25,000
…
15



On each pound of that part of the estate exceeding
25,000
but not exceeding
30,000
…
18



On each pound of that part of the estate exceeding
30,000
but not exceeding
35,000
…
21



On each pound of that part of the estate exceeding
35,000
but not exceeding
40,000
…
24



On each pound of that part of the estate exceeding
40,000
but not exceeding
45,000
…
28



On each pound of that part of the estate exceeding
45,000
but not exceeding
50,000
…
31



On each pound of that part of the estate exceeding
50,000
but not exceeding
60,000
…
35



On each pound of that part of the estate exceeding
60,000
but not exceeding
75,000
…
40



On each pound of that part of the estate exceeding
75,000
but not exceeding
100,000
…
45



On each pound of that part of the estate exceeding
100,000
but not exceeding
150,000
…
50



On each pound of that part of the estate exceeding
150,000
but not exceeding
200,000
…
55



On each pound of that part of the estate exceeding
200,000
but not exceeding
300,000
…
60



On each pound of that part of the estate exceeding
300,000
but not exceeding
500,000
…
65



On each pound of that part of the estate exceeding
500,000
but not exceeding
750,000
…
70



On each pound of that part of the estate exceeding
750,000
but not exceeding
1,000,000
…
75



On each pound of that part of the estate exceeding
1,000,000
…
…
…
80."
—[Mr. R. Bell].

Brought up, and read the First time.

Mr. Ronald Bell: I beg to move, "That the Clause be read a Second time."
This Clause seeks to draw attention to the method of collecting Estate Duty which is at present in force. The figures on the right giving the rate per cent. of duty are purely notional, and they would result in a very considerable reduction in the yield if accepted. If one proposes a change in the method of collecting a duty and works out the figures which, under the new system, would give the same yield, automatically the Clause is out of order because some taxpayers somewhere would have to pay more taxes. Last year I went through the laborious process of working out the right figures and was rewarded by having my new Clause ruled out of order. Accordingly, the figures which I have put in this year are purely notional.
At present, Estate Duty is raised by a series of steps in the rate, each step relating back to the whole body of the estate. Thus, on the first £2,000 there

is no Estate Duty. If the estate is between £2,000 and £3,000 there is a duty of 1 per cent., not on the excess over £2,000 but on the whole estate. So it is at each step. For example, if the estate exceeds £10,000 but is less than £12,500 the rate of duty at present is 6 per cent. on the whole estate.
The consequence of that is that each time the rate goes up we have a band in which the amount of the total duty leviable would actually be higher than if the estate were a little smaller. If the estate were £2,000 there would be no duty, but if it were £2,001 there would be 1 per cent. duty upon the whole estate. One's heirs would be unlucky if one died leaving an estate just within the duty level or just within one of the higher rates of duty. The inheritors could then be out of pocket by it.
This system was introduced with the duty, in 1894, when the highest Estate Duty was 8s. 6d., which it reached when the estate was worth £1 million. As the rate began to go up, this point began to


acquire significance. In the Finance Act, 1914, a degree of marginal relief was given in that the rate of duty should not exceed 100 per cent. In other words, it meant that the Revenue contented itself with taking the whole excess. It did not actually charge the beneficiaries extra because the estate was higher. By the proposed Clause we are trying to remedy the confiscation of the amount at each step where 100 per cent. duty is charged.
This works all the way up the scale. In the case of an estate of £2,000 there is no duty, but the next £20, up to £2,020 is confiscated by the Revenue, because the rate of duty on the excess is 100 per cent. If, on the other hand, the estate is only £2,100, the rate of duty on the excess falls to 20 per cent. Later it falls to 5 per cent., and just before you get to the next increment it goes down to 3 per cent. The present system is a series of steps, and just over each step the rate of tax on the excess is 100 per cent. It gradually shelves down until just before the next step, it reaches its lowest point.
The size of the band in which 100 per cent. duty is charged increases with the size of the estate. In the case of a £2,000 estate it is £20, of a £3,000 estate £30. On £5,000, which is still a small estate, it is within the range of £50, where the whole of it is confiscated. When you get to £15,000, which again is quite a moderate estate nowadays, the range of 100 per cent. taxation is £200. If the testator dies leaving £15,200, the excess is simply pocketed by the Exchequer. In really big estates of, say, £100,000, the band of 100 per cent. taxation is no less than £5,000. It makes no difference to the beneficiaries whether a man dies leaving £100,000 or £105,000. The result is precisely the same.
That is an extraordinary state of affairs, and I have never heard any justification for it. It may be that the Financial Secretary, with his stronger moral sense, will fill that gap this evening. I understand that the Estate Duty Office are under the impression that there are practical difficulties in the way of altering the system. The alteration which I am proposing is that Estate Duty should be collected in the same way as Income Tax or Surtax, by a system of slices—so much on the first amount, so

much more on the excess over that, and so on, all the way up. We levy our tax on the excess. We shall need different figures from the existing ones, in order to give the same yield. That would do complete justice. There would be no blind spots and no desperate attempts by executors to avoid the payment of 100 per cent. Estate Duty as we all know goes on at the present time if they can possibly do it.
10.15 p.m.
The only objection that I can find for this obvious improvement is that it might create doubt and difficulty where the amount of the estate is subsequently revised. It is said it would be more difficult to recover the additional tax caused by a lot of adjustments of the value of the estate. I do not follow that. I quite agree that the amount of duty varies according to the amount of the estate, but it is common for a provisional figure to be agreed for probate, and for that to be revised when the estate has been completely wound up.
If there is an increase in duty it has to be collected from the beneficiaries if the executors have been so unwise as to leave themselves with no margin with which to administer the estate. I do not think that executors generally are so unwise as to leave themselves nothing in the estate, but if they do then the beneficiaries will have to pay.
Precisely the same result will follow if this scheme which I propose is adopted. If the value of the estate is to be revised and the tax reassessed, then I see no reason why the amount should not be recovered from the beneficiaries. There is no reason why it should be met by the residuary legatee, the man who is paying out on the top slice. That could easily be covered. All the beneficiaries will do is they will simply take from their proportion that extra part of the duty.
I am quite satisfied that the Clause as it stands cannot obviously be accepted, but I move it for the sake of raising the point. It would be quite simple for the Treasury, in reframing this, to provide that the beneficiary should simply bear their repayable proportion of the duty. If that can be arranged, I can see no reason why this undoubted reform in Estate Duty matters should not be accepted.

Mr. Arthur Colegate: The new Clause before the Committee is simply an assimilation of death duty to the scheme adopted for Surtax. Whatever the rate payable for Surtax may be and however wealthy a person may be, he never pays 19s. 6d. on the whole of his income. He only pays 19s. 6d. on a certain portion of it. Like everybody else he gets the first £2,000 entirely free of Surtax. Even if his income is £100,000 a year he still gets the first £500 and on the next £500 he only pays 2s. in the £ Surtax, and so on up to a figure of £20,000, after which he pays 10s. in the £. That figure has been found to be applicable and it has not been changed by any Government since Surtax was first imposed.
This principle has been overlooked in death duties, because I am afraid that death duties have been looked upon by subsequent Chancellors of the Exchequer as the easiest way of getting money without actually, in fact, knowing that of all the taxes charged at the present time it is the one which offends against every canon of tax collection. It is irregular, uncertain and it can never be collected beforehand. This Clause would, of course, have the effect of reducing the amount from death duties for a year or two, but it would probably increase the amount derived because at the moment there is no doubt about it—this is well-known to everybody—that death duties creates the biggest schemes for avoiding the payment of the tax than anything else.
Every device that can be adopted is taken to avoid the payment of death duties, to the great disadvantage of the accumulation of capital, which all Governments today admit is a very necessary part of our economy This capital ought to be in circulation for the further extension of the industrial capacity of the country.
There are an immense number of schemes for the avoidance of death duties, and one of the first things that has to be done is to remove the anomaly from the tax altogether. I felt very strongly about one aspect of it in 1941, and I am very glad that at last I have had some small success, because for the first time —and I am grateful to my right hon. Friend the Chancellor of the Exchequer —death duties will no longer be levied

on the estates of soldiers, sailors and airmen killed in action. That is only one of the many anomalies. Anyone who deals with small businesses knows the amount of damage that can be done to them by the necessity to raise the capital to pay death duties on the scale imposed. That is particularly so on the estate of £50,000 or £60,000, and if a lower scale of death duties were levied then I believe it would be for the general good of all, and would bring in an additional income from this duty.
It would be out of order for me to discuss other matters arising through the desire to avoid the payment of death duties at their full rate, such as the question of insurance policies. All I can say is now that while I realise that the Chancellor will not be able to accept this Clause, I hope he will be able to give serious attention to this matter and see that the anomalies are smoothed out so that we can have a tax which is workable, which yields a reasonable amount of Revenue, and, at the same time, does not lead to the immense amount of wasted effort for the avoidance of payment of the duty which is in operation today.

Mr. Albu: The hon. Member for Buckinghamshire, South (Mr. R. Bell) said that the figures in the new Clause were purely notional, and I think he tried to say that he was not in favour of any general reduction in the yield but wanted to make smooth progression.

Mr. R. Bell: I moved this new Clause to raise one specific point quite regardless of the merit of the existing scale of death duties.

Mr. Albu: We can only debate the Clause that is on the Order Paper, and the hon. Member for Burton (Mr. Colegate), who supported the hon. Member, has made it very clear indeed where he stands in this matter. The case that he made was for a reduction in the death duties themselves, and, of course, the figures in the Clause would involve a very substantial reduction in the yield of the present duties. Therefore, we must give some consideration to the merits of the case for a reduction in the yield on death duties and, perhaps, particularly to reductions at some of the lower levels, to which the hon. Member for Burton referred in the second part of his speech.
Whatever may have happened—and a great deal has happened—in recent years about the distribution of the national income and its fairer distribution as between different sections of the community—the closing of the gap between the top and the bottom levels of income receivers —practically nothing has taken place in regard to the redistribution of wealth. Very little change has taken place in this century. In spite of all the effects of taxation and death duties, there has been very little change as a result in the final distribution of property between various groups of people.
It is difficult to obtain figures of this sort, but some calculations have been made, for instance, by Miss Kathleen Longmore of the Oxford Institute of Statistics. Not counting persons under 25 years of age and ignoring sums of less than £100, her figures show that in the years 1936 to 1938, somewhere between 11,000 and 17,000 persons owned between 191 and 24 per cent. of all the property in the country, whereas in the years 1946 and 1947 somewhere between 15,000 and 17,000 persons—roughly the same scale of numbers—owned between 14 and 18 per cent. of all property. Therefore, practically no change has taken place between those years before the war and after the war.

Mr. Colegate: I was not talking about the totals of property, to which the hon. Member refers. I was referring to small businesses, which is quite a different matter.

Mr. Albu: The Clause, of course, would reduce Estate Duty for estates from over £1 million right down the scale. I must deal with the Clause as it appears on the Paper, and one must consider the total effect of Estate Duty over the whole range of property income.
If one looks at it another way, in 1926 something like 1 per cent. of the population owned something like 57 per cent. of the property in the country. Ten years later, in 1926, still 1 per cent. of the population owned 55 per cent. of the property. In 1946, 1 per cent. of the population owned 50 per cent. of the property, so that in that time the amount owned by this small proportion of the population that owned one half or more of the

property of the country, had fallen by only 7 per cent.
Another way of looking at it, which is, perhaps, more relevant to the issues that we are immediately discussing—the question of Estate Duty—is to look at the figures of estates of over £50,000 in the Reports of the Commissioners for Inland Revenue. Their last Report, for the year ending 31st March, 1951, shows that 1,839 estates worth over £50,000 were liable for tax; that was 2.98 per cent. of all estates liable to Estate Duty. This very small number of estates was responsible for just under one-third of the total value of all estates liable for duty.
The total number of estates liable for duty was itself only just over 61,000, and, of course, that included all estates worth over £2,000 out of something like 500,000 adult persons who must die every year. This is a measure of the extreme inequality of the distribution of wealth and is a reason why we should not make any modification at present in the direction of reducing Estate Duty.
I come, finally, to the point dealt with last by the hon. Member for Burton: that was. the difficulties that, he says, face family businesses on the death of the owner. The hon. Member is probably well aware that there has recently been a Report on this subject by the Board of Inland Revenue—Command Paper 8295—entitled "Estate Duty and Family Businesses." This was a report on a statistical investigation that the Board made to find out the effect of death duties on family businesses.
The Report took samples covering all the cases arising in one year at different levels of size. Taking trading companies only, and not estates or investment companies, which were used merely for the purpose of providing a convenient method of holding private assets, it was found that the number of cases where the non-trade assets were insufficient to pay the whole of the duty, was 0.7 per cent., and that there had been very little difference since 1922, in spite of the considerably increased Estate Duty. In the 86 cases in their sample where the non-trade assets were insufficient to pay the whole of the estate duty, in 51 cases—or 60 per cent. —the proportion of trade assets required was less than 25 per cent. Thus the argument, frequently adduced,


that the Estate Duty has had the effect of wiping out a large number of family businesses does not appear to hold water.
But if the case were stronger, it is still necessary to examine the justice of the claim. If a business is successful, money can be raised to pay duties, if necessary, or it can be turned from a private into a public company.

10.30 p.m.

Mr. Colegate: The hon. Member must know that small family businesses cannot be converted into public companies and sell shares on the market. No firm in the City of London would even think of handling them.

Mr. Albu: If a business is as small as that, I do not believe that where it is successful and where the inheritors are efficient there would be difficulty in borrowing the money required to pay the duty. Board of Inland Revenue figures show that the number of such cases is small. However it is done—by borrowing the money or selling the shares on the market—there is no doubt that the inheritors would continue to control the business in the first generation. If in the second generation the family inheritors are unable— [Interruption.] Perhaps the hon. Gentleman would listen to my argument, although he does not like it.

Mr. Colegate: I have listened with extreme care and have realised how unsound it is.

Mr. Albu: Perhaps the hon. Gentleman will wait until I have finished the argument. In the first generation the family would keep control.

Mr. Colegate: No.

Mr. Albu: There are many devices by which a family can keep control of a business if they want to. If on the second passing of the business— [Interruption.] If hon. Gentlemen would stop muttering I might be able to get on. [Interruption.] The hon. Member for Burton is about the rudest Member in the Committee. I repeat: if on the second passing of the business the family members are unable to keep control, it will be probably because they are not efficient. There has been far too much nepotism in family businesses, and certainly the carrying on of businesses from one generation to

another does not make for efficiency unless the inheritors are themselves extremely efficient and up to date. If they are so, they will be in no danger of losing control.
A lot of this nonsense about family businesses has been based on sentiment, nepotism, or pure feudalism, and the sooner we get rid of it the better. Even if there is a case for providing some reduction on the pure ground of need, I do not agree on the grounds of efficiency or equity.

Mr. Boyd-Carpenter: I do not propose to get involved in the discussion between the two hon. Gentlemen on the broad general question of the level of estate duties and their effect, because on this particular Clause, although it is perfectly fair to point out that its effect would be to reduce the yield of the death duties—by some £60 million in a full year—my hon. Friend the Member for Burton (Mr. Colegate) did make it clear that his purpose was simply to raise the question of the actual method of assessment of estate duties. My hon. Friend the Member for Buckinghamshire, South (Mr. R. Bell) made it clear that he had selected these figures, not with any particular affection for them, but simply in order to secure that he kept his Clause within the rules of order.

Mr. Mulley: Surely the hon. Gentleman will agree that the speech of his other hon. Friend, the hon. Member for Burton (Mr. Colegate) was with regard to the figures of Estate Duty as shown in the Clause? Will not the hon. Gentleman answer that point?

Mr. Boyd-Carpenter: At the moment I propose to deal with the point my hon. Friend the Member for Buckinghamshire, South not only put forward tonight but in regard to which he was good enough to give me private notice by correspondence a little while ago. It is only incidentally and accidentally that my hon. Friend's Clause gives rise to a general discussion on the rate of Estate Duty, and my hon. Friend made it clear that if his general point of view could be accepted he would be perfectly happy if the figures were so adjusted as to prevent a loss in the yield. I do not think I misunderstood him.
On the point of the general yield, I would only say that whatever may be the merits or demerits of Estate Duty at its present level, the loss of yield of £60 million a year, in our present position, is quite clearly one which my right hon. Friend could not possibly consider.
The point which was intended to be raised by this Amendment is—as I think hon. Members on both sides of the Committee would agree—an interesting, instructive and rather valuable one. As I understand it, my hon. and learned Friend wants to apply to the assessment of Estate Duty substantially the same principles as are applied to the assessment of Income Tax and Surtax, namely, that we should not apply a particular rate over the whole sum that becomes subject to tax but that we should apply different rates to different slices of the tax.
That is an interesting proposal. It is not a wholly new one; it was raised in another place by Lord Pethick-Lawrence, some three years ago, and it has been frequently canvassed in the past. Superficially it is not unattractive. It is undoubtedly the fact that the difficulty of the present system is that to which my hon. Friend drew attention, namely, that at the points where one goes to a higher rate of duty, even operating a system of marginal relief as we do, there is a consequence that at certain points the net estate after tax is not increased at all, even with a rise of several thousand pounds in the gross estate. Looking at the matter in the abstract, and from the point of view of a perfectly efficient system of taxation, that is a defect. Whether it is an inevitable defect is perhaps another matter.
My hon. Friend, as I understand it, seeks to cure that defect by this slices system—by applying different rates of tax to different parts of the estate which is subject to tax. I think that the difficulty we come upon when looking at this question is that in the case of Income Tax and Surtax the tax falls upon the income of one person—it is one person, or one body corporate, as the case may be, who enjoys the income and is responsible for the tax—but when one deals with Estate Duty the matter is far less simple.
In the case of an estate of any size, property often passes under more than

one title. We may be concerned with gifts inter vivos; joint property passing to survivors; nominated life assurance policies; the passing of a life interest under an existing settlement, and the passing of an annuity. There is a whole variety of different titles under which an estate can pass. Equally, an estate of any size very often passes to a whole variety of beneficiaries, and that makes the matter much less simple to deal with than the income of one particular person with that one particular person liable for the tax. My hon. Friend pointed out that often under the existing system one gets into difficulties, because of the discovery of further property or an alteration in the valuation, and it becomes necessary to put in a corrected affidavit for the alteration of duties. Occasionally executors often retain in their hands, to the fury of the beneficiaries, a substantial part of the estate until sufficient time has lapsed to make further variations improbable. Let us see what happens in that case if a slice system is introduced.
It would have to be much more sharply graduated, if we are not to lose the yield, than it is in the tables on the Order Paper. A comparatively small alteration in the value of the estate would bring one into another slice with a proportionately higher rate of duty. I assume that what my hon. Friend contemplates is the sharing by the various beneficiaries, apart from those with specific legacies, of whatever particular rate of tax the property which they inherited bears. We then come at once to the difficulties one may get into with increased valuation and into another slice with a sharp increase in duty.

Mr. G. R. Mitchison: I fully appreciate these complications. they seem extremely difficult. I was wondering if the Government would consider setting up another Douglas Committee to investigate the fact of this dead spot—if I may call it that—in the mortality rate?

Mr. Boyd-Carpenter: Any suggestion by the hon. and learned Member will be given the weight it deserves. I do not want to detain the Committee with these complications. They only show what I desire to show, first of all that we have given most careful consideration to what he has said. My hon. Friend was good


enough to write to me on this point, and in my reply I indicated some of the difficulties I have indicated to the Committee now. Clearly in his Clause, which he does not want to press, what he wants is to secure some improvement in the general system of Estate Duty. In view of the difficulties, I cannot tell him that we accept his specific proposals, but it may be that with his assistance and that of other hon. Members we may be enabled to clear up some of the difficulties.
On our present view, this Clause raises quite different difficulties from the present system, but difficulties which are just as serious. What I want to indicate is that, although we cannot accept the proposal, I do not want it to be thought that I think the present system is free from all faults. I think it has many, and, in particular, the one we have been discussing tonight.
I am also indicating that we are prepared to look further into the general line my hon. Friend has mentioned to see whether the difficulties can be removed and some better system evolved from it. That does not, and cannot, commit us to anything other than a willingness open-mindedly to look at the proposals that may be brought forward to improve this part of our taxation. I am prepared to tell him that we have found his suggestion interesting and constructive, and are prepared with his assistance and that of any other hon. Gentlemen to look further into it, as we are always prepared to accept any assistance hon. Gentlemen can give us to secure what we all want, that, particularly when taxation is as heavy as it is now, the system should be as fair between taxpayer and taxpayer as human ingenuity can devise.

10.45 p.m.

Mr. Hugh Dalton: If the Government appear to be in any danger of being defeated on this Clause, I would offer them the support of the Opposition: their majority fell to 10 on the last Division, and that must have caused the heart of the hon. Gentleman to beat a little faster. I do not know if the back benchers opposite are going to press this, but, if so, he will have our assistance if he desires it.
The death duties are not only the most just, but the most painless, and the most satisfactory of all taxes; the dead feel

nothing, and the living are enriched, although the tax limits the riches passing to one person. The proposal before the Committee is, I venture to think, merely for re-writing the scale, and there is less in it than the Financial Secretary is inclined to think; because by simple arithmetical processes, one can take a scale consisting of average charges and turn it into a scale of sliced charges.
It would be quite easy to re-write the existing scale, although not in the actual figures in this Clause, which take away £60 million of revenue. But if one did that the marginal rates would run at the top end to a higher figure. It would be possible to present the existing scale in the manner proposed while changing nothing in its incidence. This does nothing to lessen the revenue, but merely presents the same facts in another way.
I considered this when Chancellor, and it then appeared to me that there was no particular advantage in changing the method of writing out the scale, and even with the slice method, there is still a sharp break at the point of passage from one slice to the next; if one has the existing marginal reliefs one does not gain much by changing from one method to the other.
My hon. Friend the Member for Edmonton (Mr. Albu), who is a specialist in these matters, and has written on this subject—most recently in new Fabian Essays—referred to the effects on the inequality of fortunes of this system of taxation. I think I may say that I am the only Chancellor since Harcourt who has ever made any substantial reduction in the death duties; whereas, the present Prime Minister, the late Sir Kingsley Wood, and others, have thrust up the scales of these duties. But I reduced it by lifting the old exemption figure from £100 to £2,000 as the point where the Estate Duty should begin. I thus relieved 75 per cent. of the estates which would otherwise have been liable. I more than made up the loss of revenue by raising the tax on the larger estates.
Having done that, I say that if there is any case at all for looking at the Estate Duty structure now it is not so much by a Clause such as this but by making a change in the scale—perhaps, in view of changes in the value of money, and so on, to lift even above £2,000 the


total exemption and to recoup the Treasury by adjustments of the scale at the higher levels, making it more highly graduated than now. I trust that in the Treasury that possibility will also be examined in relation to yield, the balance of loss and gain, and so on.
The hon. Member for Burton (Mr. Colegate) said that he was very anxious to see "anomalies" smoothed out. That is the whole purpose of the steeply graduated Estate Duties. The "anomalies" are the millionaires and their heirs and successors, and the purpose of a steeply-graded tax of this character is constantly to work against the creation of anomalies in the form of abnormally rich people whose wealth is wholly out of relation to any service they have rendered to the community. Therefore, we judge this to be one of the most just and moral taxes in the whole system. I trust that in the coming years we shall be strengthening it still further against the greater fortunes while giving larger benefits to the poorer.

Mr. R. Bell: I realised that this was slightly misleading in its form because the figures must be so much lower than the existing ones. I did bear that in mind and did write to my right hon. Friend, but after hearing the speeches since made by hon. Members opposite I realise that I should have written to the Opposition also and then I would have saved them a certain amount of labour and sorrow.
I do not agree that the present emergency relief takes care of the situation unless it means that the Revenue takes 100 per cent. of the marginal slice. In view of the form which my Clause had to take I should in any case have sought leave to withdraw it in view of the undertaking which the Financial Secretary to the Treasury has given. I realise the limitations of his undertaking and I have all the greater pleasure in asking the leave of the Committee to withdraw the Clause.

Motion and Clause, by leave, withdrawn.

New Clause.—(NEW PURCHASE TAX RATES.)

The provisions of section twenty of the Finance Act, 1948 (Relating to purchase tax) and of the Eighth Schedule to the said Act shall hereafter have effect as if the second rate

of purchase tax is one-half of the wholesale value of the goods and as if all articles at present chargeable to the first rate of purchase tax are hereafter exempt from purchase tax.—[Mr. Jay.]

Brought up, and read the First time.

Mr. Jay: I beg to move, "That the Clause be read a Second time."
I wish to make two emendations to the Clause. The first is to alter the word "half" to "55 per cent." and the second is to alter the words "exempt from purchase tax" to "chargeable to 26 per cent. of the wholesale value of such goods."
These alterations are to bring the Clause within the bounds of order, in view of the alterations made in the Bill since the Clause was first put on the Order Paper.

Mr. Boyd-Carpenter: I take it that the right hon. Gentleman is making—with your permission, Sir Charles—amendments to the Clause.

Mr. Jay: That is correct. I think that is in order.
Like the hon. Member for Buckinghamshire, South (Mr. R. Bell), I framed my Clause in this fashion, not primarily because I have a special affection for these figures or wish to press the proposal in this form, but rather to draw attention to certain of the goods now subject to Purchase Tax at the old rates of 66⅔ and 33⅓ and to ask the Government why, in this year's Budget, unlike last year's, no action has been taken to exempt from Purchase Tax altogether some of the ordinary necessities of life which are still subject to it. For that reason, we do not intend to press the Clause in this form to a Division, but it is my belief that some of my hon. Friends may wish to take advantage of it to mention by way of illustration some of the types of goods which we think might well be exempted from tax altogether.
There have been, and there still are, two general conceptions of the Purchase Tax. The first conception was that of a general sales tax falling at a flat rate on all consumer goods. That was the type of tax originally introduced by Lord Simon, when Sir John Simon, in the Budget of April, 1940. That is the type of tax which the Opposition have never favoured. In our view it is a regressive


type of tax which tends to fall more heavily on those with lower incomes because, since all goods are taxed at a flat rate, they are compelled when buying necessities to pay a larger percentage of their incomes in tax.
When, in the last Parliament, on one occasion I said that the sales tax conception was favoured by the party opposite, I was called upon to advance evidence of support from them for that tax. It happens that the right hon. Gentleman the Member for Blackburn, West (Mr. Assheton) as will be recollected by the Financial Secretary, in one of our earlier debates on the Bill, said that he favoured the general conception of a sales tax.
Our view of what the Purchase Tax ought to be is quite distinct. We favour a tax that falls more heavily on luxuries and much less heavily on near-necessities and necessities. We have really been engaged over the last five or six years in trying to transform the tax gradually from one which was nearer to the general sales tax conception into one which fell more heavily on luxuries. It seems to us that there is certainly a case for Purchase Tax falling on luxuries. There is no less good a case for taxing furs and jewellery than there is for taxing tobacco, beer and petrol. We have, therefore, over the last few years, when we were in the Government, exempted a number of household necessities from Purchase Tax altogether, and it was our intention to continue doing that in further years had we been on the other side of the House.
11.0 p.m.
I would just remind the Committee that in last year's Budget we exempted altogether, for instance, dusters and cleaning cloths, ironing boards, sewing needles, knitting needles, school satchels and shoe laces, and eventually, in response to one of my hon. Friends, tooth brushes. It was our intention to continue that good work in the present year, and I will give this secret to the Financial Secretary: that we had particularly in mind certain goods such as household soap, razor blades and other things of this kind—including cutlery. We were not in a position last year to include these in the list because we were, in that Budget, seeking for extra revenue, but one has in the present year to regard this

matter in the light of the position in which the Chancellor finds himself. In his Budget he gave away very large sums in remission of taxation.
Therefore it seems to us there should have been a case, in the interests of stability in the cost of living, of holding down the cost of living—and all that means in terms of wage and price stability—for at least a further modest step forward in making exemptions of this kind. I will leave it to my hon. Friends to mention some of the special types of goods we think might qualify for such an exemption, but I hope that the Financial Secretary will tell us why this was not included in the Budget this year.

Mr. Ralph Morley: We are discussing this evening the Purchase Tax, which is a form of indirect taxation, and I think it is a general valid canon of taxation that direct taxation is bad taxation. Indirect taxation is regressive taxation and it falls with the greatest severity on those with the lowest incomes. I remember that in the early days of the Socialist movement the pioneers of Socialism in this country were always most vehement in their condemnation of indirect taxation and favoured the transfer from indirect to direct taxation. Many of them, whose pamphlets I read at the time and whose speeches I heard, if they had lived to see the time when two Socialist Governments from 1945 to 1951 imposed such a heavy volume of indirect taxation, would have been very greatly disturbed and disillusioned.
It seems to me that the only excuse for any form of indirect taxation is if it has a sumptuary purpose and is meant to prevent the consumption of the particular article that is taxed. I suppose that would be the excuse for the heavy taxation we have at present on beer and tobacco, although my personal opinion is that, although heavy taxation has had the effect of curtailing the consumption of these commodities to a certain extent, it is imposed at too high a level at the present time, and should be reduced.
No one would argue that there was any justification for a tax imposed upon knowledge, or upon the implements by which knowledge is acquired. But today Purchase Tax is imposed upon a very wide range of school requisites which


are in every day use by practically every scholar in our schools. There is Purchase Tax upon school stationery, upon stationery used in school exercise books of every description, in school copy books and in school drawing books. In fact, I believe as much as £1 million a year is levied in taxation upon school stationery.
Then there is taxation upon the little toys and gadgets that are used in teaching in infant and kindergarten schools; and then there is the Purchase Tax upon a wide range of needlework materials which are above the D level. When teachers find they have not sufficient apparatus and equipment to proceed with in an up-to-date manner they generally fall back on chalk and talk, but even the harmless chalk in the schools today is subject to Purchase Tax. The cost of chalk from the manufacturer is 1s. 3d. a carton, but after the uplift to the wholesaler and Purchase Tax has been added, the cost of the carton is raised to ls. 10½d.
Although, happily, text books are not subject to Purchase Tax, about 4s. in every £ spent on school requisites is Purchase Tax. It seems an absurd form of taxation to tax the things used in schools, because, after all, that taxation has to be paid by local authorities, and to meet it they have to raise another tax in the form of the local rate. There is no advantage gained from a national financial point of view in the taxation of school requisites.
I am pleading tonight that the Financial Secretary should take into account the possibility of the reduction of the Purchase Tax on the whole range of school requisites, and even, where possible, to free them altogether from tax. When the tax on stationery was first introduced by the present Leader of the House, who then occupied the more onerous position of Financial Secretary to the Treasury, he declared that he regretted having to place a tax on such articles, and he hoped that immediately the war was over the tax would be reviewed with a view to its withdrawal.
Last year, in the course of a debate on Purchase Tax the right hon. Gentleman the Member for Blackburn, West (Mr. Assheton), whose lucid speeches on economic affairs we all listen to with

interest if not complete agreement, said on this subject:
…there are both economic and administrative considerations which justify the removal of Purchase Tax from stationery … This tax is inflationary and is a direct tax on production. … We believe this tax is a bad tax and that it should be removed. We give notice of our intention to press for its removal at the appropriate time."—[OFFICIAL REPORT, 14th February, 1951; Vol. 484, c. 575-7.]
I suggest to the Financial Secretary that now is the appropriate time and I hope that at least he will be able to offer some concessions with regard to the Purchase Tax on stationery used in schools.

Mr. Coldrick: I am pleased to be able to give support to this Clause. Over a period of years we have constantly opposed certain features of the Purchase Tax. In the past we have succeeded in getting Labour Chancellors to exempt an increasing number of articles from the effect of the tax. Tonight I want to pursue the attack in the hope that the present Chancellor and Financial Secretary will pay attention to a number of articles which I wish to mention.
First, 1 should like to endorse the remarks of my hon. Friend the Member for Southampton, Itchen (Mr. Morley) about stationery. I shall not touch the question of the stationery used in schools. One of the great anomalies of Purchase Tax has always been that there is even a tax on the books which every trader has to keep in order to record the Purchase Tax which he must give to the Chancellor. I ask the right hon. Gentleman to take that into consideration.
Certain other articles have been mentioned, including razor blades. When one walks around the Houses of Parliament and sees the pictures of venerable statesmen, when apparently whiskers and wisdom were synonymous, one can understand any Chancellor in those days looking upon the razor, whether safety or otherwise, as a diabolical instrument designed to disfigure people. But in these days when we see that all the people from Oxford and Cambridge, Eton and Harrow, those institutions which always supported the traditional, have now succumbed to the use of Gillette blades, and so on, a different view should be taken,


I believe that those hon. Gentlemen would as soon come to the House of Commons in their underwear as come unshaven into the Chamber.
As the razor is now an article used by almost every man, it is incredible that a modern Chancellor should impose a tax upon it and other necessary articles, such as soap. Then there is the question of cutlery. It would be cruelty on my part to talk about cutting meat in these meatless days. but we spend millions in schools and other places trying to teach table manners to children. We teach them the use of the knife and fork, and so on. Though it is true, to judge from what I have read and pictures I have seen, that even royal families in the days of Henry VIII were inclined to grab hold of the bone and gnaw the succulent meat from it, I do not think that even the hon. Member for Orpington (Sir W. Smithers) would like us to go back to that practice.
One recognises that in the most humble homes the acquisition of cutlery is essential. Therefore, it is incredible that any Chancellor should impose a Purchase Tax upon cutlery. As we move into a period when there is a slight recession in trade, it will become increasingly difficult for the trade to provide the poorer families of the community with these desirable articles, unless the Chancellor removes Purchase Tax from them.
Lastly, we recognise that as a result of the increase in the duty on hydrocarbon oils there will be an increase in the price of linoleum and floor covering. The Labour Government built well over one million houses. If the Conservative Government live up to their promises, they will build well over another million in about three years. Therefore, one can conceive the millions of miles of linoleum which will be required. Young people setting up home have to face the fact that they need something more than mere brick walls. It is essential that at least they should have some form of floor covering. When we consider the rent and rates they will have to pay—

The Deputy-Chairman (Mr. Hopkin Morris): I hope that the hon. Member will not bring within his argument such a variety of subjects, including the Rent Restrictions Acts.

11.15 p.m.

Mr. Coldrick: I was merely giving that indication of the terrific problem with which a lot of people will be confronted in the expense of purchasing floor covering. Floor covering is a very necessary item, and one which warrants the attention of the Chancellor for a substantial reduction, if not complete exemption, as far as the tax is concerned.
The Financial Secretary is no doubt aware that the sanitary and other inspectors from the Home Office can, when making their visits throughout the country, compel traders who employ more than three or four people to maintain an adequate supply of hot water. That I regard as essential. The introduction of either a gas or electric heater, or a water heater of some kind, then becomes necessary, and the trader has at once to pay 66⅔ or 100 per cent. tax upon those things which the Home Office regard as essential for hygiene and health reasons.
Without enumerating further examples, I ask the Chancellor to give his very favourable consideration to our request for the removal of, or a very substantial reduction in, the tax that is imposed on all these various items.

Mr. Mulley: In support of the Clause I could quote many more examples of the operation of the tax, but I do not want to weary the Committee by going over ground that has already been covered or which, I suspect, will be covered by hon. Members on one side or other of the Committee. We may be hearing, for example, from the hon. Member for Kidderminster (Mr. Nabarro) about Purchase Tax on equipment that is designed to promote economy in the use of fuel.
I endorse very strongly the remarks of my hon. Friend the Member for Itchen (Mr. Morley) concerning educational requisites that now carry tax. The Financial Secretary may well argue that it is very difficult to separate stationery which can be used in school and stationery that is used elsewhere. He may also argue that it is really a matter of taking the money out of one pocket and putting it into another, in the sense that the Purchase Tax goes to the Government and, of course, the educational grants are made by the Ministry of Education. But before he puts that argument, I ask him to reflect that a certain amount of local


education authority money which is raised by local taxation is also required to give schools their necessary educational supplies, particularly in view of the recent economies. I ask the hon. Gentleman, therefore, to give special consideration to the provision of tax-free supplies for schools.
The whole range of household and toilet requisites is another matter which demands urgent attention by the Government, particularly because my right hon. Friend the Member for Leeds, South (Mr. Gaitskell), when he was Chancellor of the Exchequer, made a number of substantial concessions and improvements in this direction; and I have no doubt that had we remained in office we should have extended the number of these essential commodities to be brought either to a lower lever of tax or free of tax.
There was the difficulty last year that it was the first year of re-armament, and revenue was a very important matter; but this year we have had already a number of revenue concessions, and I should have thought that essential articles would have had a very strong claim to consideration for any concessions that the Chancellor felt able to make. Instead, however, in a number of cases we have had additional Purchase Tax rather than a reduction.
The particular case I want to argue is cutlery, because I represent a constituency in Sheffield which manufactures nearly all the cutlery in this country. Things are difficult now for cutlery firms, particularly in view of the loss of overseas orders. Every week of late there have been a substantial number of people laid off or put on short time, and, although employment is not the only angle from which to view the incidence of Purchase Tax, at any rate the cutlery industry has the same case as the textile industry for consideration. When we add to that substantial case the fact that cutlery is an essential everyday article in common use, there is an overwhelming argument for taking at least a large number of grades of cutlery out of the range of Purchase Tax altogether.
Cutlery and a number of other similar commodities have never had a utility scheme. As the Financial Secretary knows, cutlery is strictly anything that cuts, and forks and spoons are within the province of the silverware industry, but

I take the two industries together. Neither has been able to produce any article for the home market that is free from tax. This was raised with the late Government, who rather regarded cutlery as a marginal case. I suggest that had they been in office now we should have succeeded in getting a concession, at any rate for part of the cutlery trade.
It is serious that the present Government should have proposed, not consciously, but certainly in practice, to increase the incidence of Purchase Tax on cutlery. On 29th April, after the Chancellor had presented the Budget, the Customs and Excise office issued a notice that brought within Purchase Tax a great number of scissors and blanks sold by the cutlery trade which had hitherto been exempt under Group 13 (B) of the Schedule.
I have raised this matter by Question in the House. The effect of the decision is to extend the range of Purchase Tax on cutlery, and it is a particularly unfortunate incidence since the articles concerned are industrial scissors and tools of trade. Thus, whereas the Chancellor rightly prided himself for having removed overalls from Purchase Tax, he has put in the net of Purchase Tax for the first time industrial scissors that are used in textile manufacture, and this at a time when the textile trade is in difficulties on its own account.
I have a copy of a letter sent by the Sheffield Cutlery Manufacturers' Association to the Secretary of Customs and Excise, in which it says that one member, as a result of the change in classification, says that the price of one dozen pairs of industrial scissors used by the girls in the textile industry goes up another 29s. 3d. It means that operatives who are already worried by short-time and the prospect of unemployment have to pay, on a hire-purchase basis, for another five weeks before they can buy a pair of scissors which they must have in order to do their work.
This is a new incidence of tax and, while it may not be the concern or the direct responsibility of the Financial Secretary, it is a decision taken by the Customs and Excise Office. I feel that the imposition of such a tax by administrative decision is a very unsatisfactory feature of Purchase Tax, and that all taxation should come before the House and


not be left to the discretion of officials of Customs and Excise.
Apart from this special case of industrial scissors, which have fallen within the range of Purchase Tax for the first time this year, I think that, taking together the employment problems within the industry, the danger of foreign exports coming in and replacing some of the cutlery orders for the home market and the very strong argument for taking out of the net of Purchase Tax articles of essential and common, everyday use, there is an overwhelming case for the exemption of cutlery at the present time. I would ask the Financial Secretary to give serious consideration to these points. Obviously it cannot be met by the present Clause but he will have an opportunity on the Report stage to introduce a Clause to make cutlery exempt, at any rate for some of the articles concerned.

Mr. J. Grimond: I should like to support the case for the removal of Purchase Tax from stationery. The tax was introduced not primarily to raise revenue but to curtail consumption, and I think it is now the case that supplies of paper are more generally available. As far as commercial stationery is concerned, it is a tax on a great many stages of production and, as is well known, it also leads to the most curious results. Envelopes of one size are subject to tax and of another size free from tax. A printed notice may be liable to tax or may escape tax, according to its wording.
As to other forms of stationery, the case has been argued in relation to educational stationery. I do not think anyone would argue that it is the desire of the Government to curtail the use of educational stationery, because they are the people who compel children to use it. I have no doubt that the children would be willing to cut down on its use to any degree which the Government may desire.
I think the case for educational stationery speaks for itself. I know it is an old chestnut in this Committee, and that the argument for some reduction of this tax must be well known to the Financial Secretary; but he will know that conditions have changed to some extent and, while I agree that it is difficult to distinguish between one use of stationery and another, has not the time now come

when paper supplies are sufficient to enable the whole question of the tax on stationery to be reviewed and either substantially reduced or removed entirely?

Mr. Edward Shackleton: I wish to make only a very short contribution, and hon. Members may be surprised to hear that it is concerned with something that is manufactured in my constituency. It is with regard to an object which many hon. Members have seen moving along the road at a fair speed and have sometimes wondered whether it was a motor car or motor bicycle. It goes by the name of Minicar.
I have no doubt that both the late Chancellor and the present one, having observed this vehicle and seen that it has a body and a hood, have decided that it was a kind of motor car and should bear Purchase Tax at the higher rate. I assure the Financial Secretary that so far from being a motor car it is a kind of motor bicycle. This is something of very great importance, because if I can convince him that it is a motor bicycle he will appreciate that it should bear Purchase Tax at the lower rate.
The arguments which I would adduce to demonstrate that it is a motor bicycle are precisely those which any hon. Member would use in arguing that a motor cycle and sidecar constitute a motor bicycle. It does have a motor bicycle engine, it is taxed for Road Fund purposes at motor cycle rates and it sells in the motor cycle market. It is exhibited not at motor car exhibitions but at motor cycle exhibitions. But unfortunately, by virtue of a very unfortunate decision by my right hon. Friend the Member for Leeds, South (Mr. Gaitskell), when Chancellor of the Exchequer, it has been treated for purchase tax purpose as a motor car.
11.30 p.m.
I ask the present Government to redeem their dreadful failure about Purchase Tax on textiles by taking some action in this matter. Here is a machine which in its manufacture does not call for skilled labour. There is serious unemployment in Lancashire and in Preston, and if the Purchase Tax could be reduced on this vehicle I am assured that we could expand the home market considerably and bring costs down, which would enable us to increase exports to dollar areas. It


would also provide employment for some unemployed textile workers and in fact solve some of the pressing problems which face the nation.
I would ask that serious consideration is given to this case, which I admit by my enthusiasm I am painting in the strongest way I can, but which none-the-less has genuine merit. I would ask that, in any consideration of the matter, the mere fact that a person sits alongside another person in a motor vehicle, should not make that vehicle a motor car, and that this admirable vehicle, which sells among people who are trying to decide between a motor cycle and sidecar and one of these vehicles, should have some of the Purchase Tax remitted.

Mr. Nabarro: Could the hon. Gentleman tell the Committee how these curious vehicles are taxed? Are they taxed as motor cars or as motor cycles?

Mr. Shackleton: They are taxed for Road Fund purposes as motor cycles but bear Purchase Tax as motor cars. There are obvious anomalies. I think it is necessary that these anomalies should be sorted out, and if the Financial Secretary will take this seriously he will meet for the first time the needs of Lancashire by giving direct encouragement to increasing employment in an area where there is today grave unemployment and distress.

Mr. Wilkins: I just want to say a few words to support my hon. Friend the Member for Southampton, Itchen (Mr. Morley) in what he has said about Purchase Tax on school stationery. I am very concerned about this particular matter, because one recalls that recently the Minister of Education apparently had an instruction to effect a 5 per cent. cut in education. In my constituency we have already had the suspension of the building of a new school, which will cause serious difficulties in the near future, because at the moment children from the adjacent area will not be able to gain admission to an adjoining school until the age of at least 5½ or later.
I make that point because I think it illustrates a possibility and opportunity for the Minister of Education to effect some saving if the Chancellor of the Exchequer would permit her to do so by

removing the Purchase Tax on school stationery. We estimate, and I am speaking here on behalf of the Purchase Tax Joint Standing Committee of the Paper, Printing and Stationery Trades of the printing industry, that in education stationery supplies alone Purchase Tax to the value of £600,000 a year is paid. That is a very substantial sum of money, which could be used in other directions on education.
I now want to refer for a moment to what is a very serious matter for the printing industry. I understand that the Chancellor has been supplied with a memorandum on behalf of the industry, which quotes a number of the anomalies which have arisen. In passing, might I say that a difference of a quarter-of-aninch in the size of an envelope means the difference between paying Purchase Tax and not paying it. That is one anomaly, but at the moment our major concern is that we are finding ourselves unable to compete with competitors on the Continent.
I am trying—and I have the support of some of the Chancellor's hon. Friends in this—to see the President of the Board of Trade in order to make representations to him. We find ourselves in very difficult competition with printing firms in Europe, and especially in Holland. I do appeal to the Chancellor to give consideration to this very serious matter. Redundancy is with us already, so far as labour is concerned, and unemployment is showing itself; in the case of a firm in Paulton, Somerset, it has reached really serious proportions. We appeal for help for the industry before it is too late; before we lose a lot of trade to continental competitors.

Mr. Percy Holman: On four occasions since 1945 I have pleaded, while sitting on the benches opposite, with former Financial Secretaries, for the remission of Purchase Tax on stationery. Two years ago, I was accused from my own benches of being too gentle with my own Chancellor. The reason was that about £20 million was involved in this tax; that was the figure given to me by the then Financial Secretary, and perhaps his successor tonight will say that the amount is now nearer £35 million, owing largely to the fact that paper has nearly doubled in


price since de-control was introduced early in 1950. Perhaps I should be even more gentle in my remarks tonight.
Let me say at once, as I have said before, that I have no financial or other interest in the stationery trade; I have been in the stationery and printing industry for only part of my life, and am now only occasionally connected with trades using stationery. I do not use the arguments I have used previously—my hon. Friends have spoken eloquently in support of the reduction or abolition of this tax.
It may be said that it is impracticable to differentiate between educational and other stationery; but there is no necessity for that, because 95 per cent. of stationery is used in commerce and administration, and half of 1 per cent. could be saved on education estimates in paper used in schools and for school administration if this Clause were accepted. Ninety-five per cent. of this enormous revenue falls on the cost of production and distribution and on our export trade.
I warn the Government that the time is now near when they will have to look into this particular tax as a tax on production. As the buyers' market becomes more general in this country it will be essential to review every tax that falls specifically on production. Neither the home market nor the export trade can stand excessive taxation upon the products of our industry. Stationery taxation is becoming considerable. It will fall in the next 12 months because paper has started to fall in price from the excessive figures at which it stood in the earlier part of this year. But in addition to that this is a tax which is overwhelmingly a cost on production and on administration. Whatever Government is in power next year should give a high degree of priority for the consideration of its complete abolition.

Mr. Blackburn: I am sure that the Financial Secretary will agree that there are many anomalies in the present scheme of Purchase Tax and that the whole system requires thorough investigation. Tonight the argument has ranged from Minicars to industrial scissors and cutlery and I want to add my word to those arguments about educational and commercial stationery, because this is not only a charge upon industry but also a

charge which the Government has to meet in its expenditure, directly or indirectly.
Every year, when there are Parliamentary, county and municipal elections, £40,000 is paid in Purchase Tax for voting papers and poll cards quite apart from tax paid on other stationery in the elections. I have had a Question down to the Treasury for some days—I know they are very busy with the Finance Bill—which I thought might have provided me with the answer I want, namely, the amount paid directly or indirectly so that these figures could be used tonight.
Examples have been given of the effect of the anomalies in the tax on stationery. I should like to quote one which shows very clearly how Purchase Tax on educational and commercial stationery needs looking into. A sheet of paper more than 13½ in. by 17 in. sold flat or loose is not taxed. The same paper sold in a roll or packed as shelf-lining paper is taxed 66⅔ per cent. the same paper sold as sandwich wrapping is tax-free. The same paper sold in a roll as ceiling lining paper is taxed 33⅓ per cent.
I am sure that the Financial Secretary will agree that there is something wrong with a scheme which allows that sort of thing to exist. I am quite certain that he would not like me to bring forward again the argument about hats, but I hope that with regard to these anomalies the Treasury are having second thoughts on the whole position. Take these articles, for example. Boot and shoe laces, sewing and darning needles, knitting pins, bodkins, crochet hooks, thimbles and tape measures are all exempt from tax—but elastic is not. If the Financial Secretary has an accident and repairs are effected by a pin he does not pay Purchase Tax, but if he uses elastic he must pay tax upon it.
11.45 p.m.
There are so many anomalies under Purchase Tax that I am sure the hon. Gentleman will agree that the scheme should be looked into very carefully with a view to removing some of them. The best way to remove the anomalies is to remove the tax itself. When Lord Simon introduced Purchase Tax he stressed that it was to reduce consumption. It has now become merely a matter of raising


revenue. If we could return to a position where we had no Purchase Tax at all we should remove all the anomalies about which we have heard tonight.

Mr. A. Fenner Brockway: I wish to raise two points about which I have been in correspondence with the Financial Secretary. The first concerns Purchase Tax upon educational equipment. We have heard about the burden of the tax upon stationery. I want to draw attention to the burden upon school furniture, and especially furniture in nursery schools. The argument is that some of that furniture can be used for domestic purposes as well, but we have the most absurd anomalies.
If a table is for one child there is tax upon it, but if it is a table for two children there is none; or it may be the other way about, but the anomaly is there. The argument is that in one case the table can be used for domestic purposes. I seriously urge the hon. Gentleman in this case to adopt the same method of rebate as in the case of war memorials. If we have a rebate for war memorials, why cannot we have one for furniture for the schools?
The other point concerns razor blades. I put this to the hon. Gentleman not only from the point of view of the consumers but particularly from the point of view of the small firms, largely engaged in the export trade, who suffer particularly because of the Purchase Tax upon their home sales and find it very difficult indeed to carry on.

Mr. Boyd-Carpenter: One of the most obvious features of Purchase Tax is its capacity to generate debate in this Committee. I have no doubt that in the course of the discussions on the Bill hon. Members have had considerable opportunities of discussing different aspects of it.
On this Clause the Committee has pursued a somewhat complicated and involved course. First, we had on the Order Paper a new Clause in the name of the right hon. Gentleman the Member for Battersea, North (Mr. Jay), designed to alter the general rates of Purchase Tax so as to reduce the 66⅔ per cent. rate to 50 per cent. and the 33½ per cent. rate to nil, Then, for reasons which the right

hon. Gentleman explained to us, not unconnected with the rules of order, a different one was moved reducing the 66⅔ rate to 55 and the 33⅓ rate to 30.
That was a perfectly proper Parliamentary device in order to introduce a general discussion upon Purchase Tax. But its effect, as was indicated by the right hon. Gentleman, was that particular cases and particular rates only come within the terms of our discussion, in the hallowed words, "by way of illustration".
I think I should comment very briefly, first, on the Clause which, in form if not in substance, the Committee has been discussing for the last hour or so. The first version would have cost £200 million in the yield of tax. Even its altered and expurgated alternative would have cost £26 million. The right hon. Gentleman made it clear that hon. Gentlemen had very little desire—as it has become clear —to discuss that at all or seriously to press either version of the proposed Clause.
The right hon. Gentleman asked where were the proposals in this Bill in respect to this. I can answer that in this way. This year my right hon. Friend has concentrated on that part of the Purchase Tax which came within the old Utility scheme and is now covered by the D scheme. I am perfectly certain hon. Members are not complaining of not having adequate opportunity for discussion on that aspect. We have discussed it at full length. So far as Purchase Tax outside the Utility scheme is concerned, my right hon. Friend has not put forward proposals for dealing with it this year. I do not think any hon. Member has cause for complaint there. We have dealt in great detail and at great length with one part of the Purchase Tax. There have been occasions in recent years when the Budget Resolutions have been so drafted as to exclude discussion on Purchase Tax altogether.
I must deal with a number of hon. Members who have raised various specific points. Quite apart from this Finance Bill my right hon. Friend, in the course of his duties, keeps the whole of this complicated and difficult tax under revue. What hon. Members have said, therefore, in this debate, or any representations that have been made on other occasions, is carefully considered and my right hon.
Friend does review these matters from time to time in order to avoid anomalies. I cannot, without going outside the rules of order, argue the case for each and every one of these specific items which, in the guise of illustration, have been discussed tonight. I have no doubt I should be going completely outside the terms of this new Clause and the rules of order generally. But I can perhaps, without incurring your displeasure, Sir Charles, make one or two general comments.
Probably the subject most frequently raised was that of the Purchase Tax on stationery. There are two particular points on that. In the first place the hon. Member for Bethnal Green (Mr. Holman) asked what was the yield. It is between £25,000,000 and £30,000,000. They are a very substantial item and a very appreciable part of the Purchase Tax revenue. A number of hon. Members raised the subsidiary aspect relating to Purchase Tax on stationery used in schools.
The problem which neither the last Government nor the present one has successfully solved in connection with Purchase Tax is any feasible method of determining liability to that tax by the test of the ultimate use of the article concerned. The purely practical difficulty is that many articles used in schools are used for other purposes, and it is not feasible to give immunity from the tax because it is alleged by the purchaser that a particular use will be made of articles. That general difficulty goes far wider than stationery, but it is one of the problems which has defied the ingenuity of successive Governments in their desire to make special adjustments in special cases.

Mr. Fenner Brockway: Is the rebate system to educational authorities regarded as an impossibility?

Mr. Boyd-Carpenter: It would be an additional grant, and it seems to me there is no particular reason why it should be treated separately from the ordinary grants. That goes for rebates. As I understand, hon. Gentlemen were raising the question of immunity and not rebate.
On the constitutional point raised by the Member for Sheffield, Park (Mr. Mulley)—and I must not go into the details of the case of industrial scissors—I have that matter fairly well in mind. The point is not that tax was imposed

by any outside body. All that arose was that on a Board of Trade interpretation of the Finance Act of 1948 it became quite clear that the facts relating to these scissors did not entitle them to the immunity given by Parliament under that Act.
The more special and detailed points which hon. Gentlemen have made will be recorded, of course, in HANSARD, and they will all be considered on their merits when the Chancellor comes to review this side of the Purchase Tax. But as I understand, as far as this particular Clause is concerned, its merits are not very seriously urged, and the object in putting it forward, as indicated by the right hon. Gentleman the Member for Battersea, North, was to enable some Purchase Tax points not previously aired in the debates on the Bill to be discussed.

Question put, and negatived.

New Clause.—(EXEMPTION FROM STAMP DUTY FOR PROPERTY TRANSFERRED TO A JOINT WATER BOARD.)

(1)When on the formation of a joint board for the supply of water comprising representatives of local authorities property of any of those authorities is transferred to or vested in the joint board no stamp duty shall be chargeable in respect thereof.

(2) In this section the expression "local authority" has the meaning assigned to it by the Local Government Act, 1933.—[Mr. Black.]

Brought up, and read the First time.

Mr. Cyril W. Black: I beg to move, "That the Clause be read a Second time."
This is a very small and modest Clause as far as its cost to the Treasury is concerned, but it is nevertheless a matter of very considerable interest and financial importance to many local authorities. I believe also that it is almost entirely a non-party matter, and I hope there may be support for the principle on both sides of the Committee.
For some reason, which it is very difficult to understand, the practice is to charge Stamp Duty on orders setting up joint water boards under the Water Act. I understand that the setting up of joint water boards is an operation which is looked upon with general approval by Her Majesty's Government, and in fact it is the declared policy of the Minister to put water supplies on to a more efficient basis. One of the generally accepted


methods of accomplishing that purpose is to set up joint water boards. For some reason, which I have been entirely unable to understand, Stamp Duty is payable in such cases. I say it is inexplicable because it seems entirely contrary to the general rule operating in similar cases.
I can give one or two instances in which exemption from Stamp Duty is accorded. There is the exemption in the case of the London Passenger Transport Board in 1933, the British Electricity Authority in 1947, the Gas Council in 1948. There is, of course, the general exemption given by Section 52 of the Finance Act, 1946, in the case of nationalised bodies generally. The Stamp Duty on the order setting up joint water boards appears to have been one solitary exception to the general exemption which is granted in other similar cases. This is a very small point as far as the Treasury is concerned. It must, I imagine, be a matter of tens of thousands of pounds a year rather than hundreds of thousands of pounds a year.
12 midnight.
No doubt whoever replies for the Government will be able to give some estimate of the amount of money involved. But while it is true that it is a very small matter from the standpoint of the Treasury, it is also true that there are appreciable sums involved as far as the local authorities are concerned. I quote one case only. In the case of the setting up of the Guildford, Godalming and District Water Board, the Stamp Duty on the order amounted to no less than £4,100, being based upon the outstanding loans of the various amalgamated undertakings which at the date of the amalgamation amount to some £207,000.
I am sure that it is hardly necessary for me to point out that water boards are in a rather special category. They come obviously within the description of public utilities. They are non-profit making and they exist, generally speaking, for the purpose of providing a public service at the lowest possible cost consistent with balancing their accounts and making neither a profit nor a loss.
I contend that the present practice of charging Stamp Duty in such cases has results which are the exact opposite of what the Government desire. First, the

charge of Stamp Duty frustrates the purpose of the Government who are believed to be favourable to the setting up of joint water boards. Secondly, it is wrong in principle, because it is different from the general practice in the case of other public utilities.
Thirdly, it is unfair as between one joint water board and another, the amount of the Stamp Duty being dependent simply upon the amount of loan that happens to be outstanding at the date at which the order is stamped. Fourthly, it is a defect in the existing tax law which it would be inexpensive for the Government to rectify. On these grounds, I hope that the Government may make some concession on this matter.

The Solicitor-General: I must congratulate my hon. Friend the Member for Wimbledon (Mr. Black) on moving this new Clause at rather short notice in a compelling speech which also had the merit of comparative brevity. He has drawn attention to a point which it should not be difficult to remedy. The Stamp Duty on the setting up of a water board is levied under Section 12 of the Finance Act, 1895. There is no doubt that it is legally levied.
At the same time, there are several precedents to which my hon. Friend referred for exempting from liability to Stamp Duty bodies created in the manner in which joint water boards are created. My hon. Friend was right when he said that the financial consequences of an exemption would be almost negligible.
We have given consideration to this point, and the reason why a provision of this sort was not included in the Bill was that in a Bill of this magnitude it was not possible to include all that we wished to do. But now that the matter has been raised, I am able to say to my hon. Friend that we are prepared to accept his proposal in principle and will table a new Clause to give effect to it on the Report stage.
We cannot accept the new Clause as it is drafted, because the definition of "local authority," for instance, applies only to England and Wales, and it would be very wrong to leave Scotland outside the definition of the Clause. There are other minor objections to the drafting of the Clause, but my reference merely to


that one should satisfy my hon. Friend that its precise terms cannot be accepted, although we accept the principle behind it.

Mr. Black: I should like to express my gratification at the reply we have just received. My hon. Friends and I are concerned only with the principle involved, and not with the particular phraseology embodied in the Clause. In view of the assurances which have been given, I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.

New Clause.—(SPREADING OF SURTAX.)

(1) Notwithstanding anything in any enactment contained, if an individual whose total income for any year of assessment exceeds two thousand pounds, proves to the satisfaction of the Commissioners that

(a) his total income for that year of assessment includes income earned by him by the exercise or turning to account of his own personal skill and talent (hereinafter referred to as his income from the exercise of personal skill and talent); and
(b) but for his income from the exercise of personal skill and talent his total income for that year of assessment would not have exceeded two thousand pounds,
he shall be entitled to elect by notice in writing to the Commissioners not later than six months from the end of that year of assessment that his liability to surtax shall be computed as if an amount of his income from the exercise of personal skill and talent equivalent to the amount by which his total income for that year of assessment exceeds two thousand pounds had been wholly or in part income of his for any one or more of the six years of assessment immediately preceding that year of assessment, and in such amounts in relation to any one or more than one of those six years of assessment as he shall decide, and if he so elects his liability to surtax shall be computed accordingly.

(2) In this section the expression "personal skill and talent" means personal skill and talent in authorship, in any of the arts, in study or research in any branch of science or learning or as an inventor.

(3) This section shall be of no effect in any case in which the result of any such election would or might be directly or indirectly to increase the liability to tax of any kind of any person other than the individual making the election.—(Sir F. Soskice).

Brought up, and read the First time.

Sir F. Soskice: I beg to move, "That the Clause be read a Second time."
At this late hour, I do not propose to make a long speech in introducing a Clause which has a very limited and

modest objective. Prima facie, one would have thought that if two people over a period of years earn exactly the same amount of money, they should, if they had to pay Surtax, pay the same amount of Surtax. But that is not the way in which our law works, because if one of them has the misfortune to earn a large amount of his earnings in one year, because of the ascending nature of the Surtax scales he has to pay much more than a person who earns the same amount evenly over the period of years.
Mr. Millard Tucker in his Report called attention to the anomaly which that discloses and, particularly in paragraphs 85 onwards, suggested solutions of it. Obviously, to remedy the anomaly on a comprehensive scale would need drastic changes in the present provisions as to Surtax, and that I am not proposing. All that I propose is, on a very limited scale, to try to remedy the position so far as it affects members of our community who are particularly disadvantaged by the working of the Surtax provisions.
I refer in particular to authors. There is on the Order Paper another Clause—(Relief to certain persons where copyright assigned for lump sum or lump sums)—in the name of my hon. Friend the Member for Aston (Mr. Wyatt) which is designed to do something in this regard. What I propose in my Clause only goes a little further than an enactment already contained in Section 471 of the Income Tax Act, 1952.
That Section enables authors to spread back for three years the emoluments which they receive from the assignment of a copyright in a work which they produce. What I seek to do in the Clause is, first, rather to enlarge the relief which that Section confers already upon authors, and, second, to try to remedy two defects in the Section, to one of which Mr. Millard Tucker calls attention in paragraph 85 of his Report.
Those two defects are these. First, it is not clear whether Section 471 of the Income Tax Act covers the case of an assignment, not for a single lump sum, but for two or more lump sums. My Clause remedies that defect by including any payments received within a single year in such an amount as pushes up the Surtax scale. The second defect of the Section is that it does not cover sums


received in respect of accrued royalty payments. My Clause is worded sufficiently wide to include payments of that sort. I have tried, therefore, to embody the purpose expressed in the Clause of my hon. Friend the Member for Aston, which unfortunately, I believe, is out of order.
In drafting my Clause I have taken the opportunity of going a little farther in the measure of relief accorded by Section 471. I have enabled the author to spread his payments back over six years, instead of three, and I have enabled him to choose which of the six years is most in his favour, whereas under the provisions of Section 471 he has to average out over the three years in which he spreads his payments. I have also somewhat enlarged the definition of authors and other persons within the purview of the Clause. My definition, I frankly concede, might go too far. My object is to invite the Parliamentary Secretary to say that he will give the matter consideration, perhaps with a view to altering provisions I have put in my Clause, perhaps to limit them.
I suggest the present definition of the persons who come within Section 471 is perhaps a little narrow. For example, a person engaged in scientific research may produce a work that can be hardly said to be a literary work; it may be a dry-as-dust volume of scientific research which possibly may possess literary qualities but which is not what people ordinarily understand as a literary work. Certainly it would not be a dramatic work, still less a musical or artistic work. A person of that sort might well not be within the ambit of the Section in the 1952 Act that at present deals with the position.
I sought in my definition to include persons of that sort. Equally I have included inventors. I have gone further and perhaps included persons who have, according to some opinions, less claim; although other people might think their claim even greater. There are singers. A singer or another person who engages in some kind of live entertainment has often to spend many years training and perfecting himself in his art, and then only at the end of a series of years does he begin to reap the reward, which may occur in a short professional life in large amounts in one, two, or three years. In

my Clause I bring him within the provisions and enable him to spread back the large emoluments he receives in one, two, or three years, during which he has attained the summit of his success, and choose the years in the previous six years to which he would wish to apportion his earnings.
I hope the Parliamentary Secretary will say he will consider it carefully. It embodies a principle that certainly is called for by considerations of justice, and it certainly does bring help particularly to authors, who deserve especially well of the community because of the services they render. A Clause on these lines is certainly necessary. Frankly, the definition is a difficult part of it, and it may go too far. It may include persons who are not deserving; but it includes persons who are deserving. I commend the Clause to the Parliamentary Secretary and hope he will give it a favourable welcome.

Viscount Hinchingbrooke: When the right hon. and learned Gentleman talks about deserving cases, does his case cover large motor car manufacturers?

Sir F. Soskice: I do not think it can be said that they are persons engaged in any of the arts. An inventor is brought within the Clause, but a manufacturer does not necessarily come within that definition. Maybe that ought to be more limited. At any rate, I have put them in to invite consideration of the proposals I have made. For those reasons—which, if he is fortunate to catch the eye of the Chair, my hon. Friend the Member for Aston (Mr. Wyatt) desires to amplify by illustrations which he has collected—I commend the Clause to the Committee.

12.15 a.m.

Mr. Woodrow Wyatt: I feel that I should begin by asking the indulgence of the Committee for venturing to speak on a Finance Bill, which I have not previously done for the seven years that I have been in the House. This is a special preserve of my hon. Friends who are economists and sit behind and in front of me, and I feel somewhat uneasily sandwiched between them. I should also declare a possible self-interest. It is conceivable—though not very likely—that at some point I might write a book which might produce


sufficient royalties to benefit under this Clause, if it became law.
The background to this Clause has been sketched by my right hon. and learned Friend the Member for Neepsend (Sir F. Soskice). I would only add that it is obvious that in any community there is bound to be a small group of people who are going to have fluctuating incomes because they do not depend on regular salaries for their livelihoods. These people often have no hope of accumulating any capital—

Mr. Nabarro: Is the hon. Gentleman seriously suggesting that, with taxation at its present level, anybody can accumulate capital?

Mr. Wyatt: I did not know that I was going to excite such controversy.
I suppose that anybody could begin a bicycle factory and make his income out of it for a number of years, at the end of which time he could sell it as capital and pay no Income Tax on it but the author is unable to sell the copyright of his own books for capital. He may write 50 books; but at the end of his writing life he is not allowed to sell the copyright in those books for an outright sum. [HON. MEMBERS: "Why not?"] Because that is the law. If it were not, he would be able to do so. I think it is fair to say that this group of people have been more adversely affected by increasing Surtax than those who have a steady income. I hope to be able to show why in a moment.
This Clause is designed to help one particular section of this group of persons with fluctuating incomes. My right hon. and learned Friend has outlined the persons who are included in that group. I am inclined to agree that it includes too large a variety of people. I think the phrase "in any of the arts" is a rather loose one, and it might be taken to include music hall performers and all sorts of persons whom we would not think were particularly deserving of the community from the point of view of Surtax. [HON. MEMBERS: "Why not?"] I do not think they have any special claim on the community in the way that those who are engaged in the arts have.
We have tried to narrow down this section to cover the people who make the spirit of the country. I think that authors,

writers, artists and musicians do, in fact, make the spirit of the country. Without them literature, painting and music would die. [An HON. MEMBER: "What about gin distillers?"] I dare say that gin distillers would continue to thrive, but there are other interests of a more lasting nature than drinking gin. I think the world would be a drab place without music, literature and painting—and, as one of my hon. Friends remarked, without gin, also.
I feel that this Committee ought to be concerned with nurturing those engaged in the arts in one form or another—either in painting, writing, music or literature. But, in fact, far from doing anything of the sort it penalises them. It discriminates against them. We do not do anything to shield or help artists today, but we put them under penal taxation. I think I can demonstrate how that happens if one takes a particular example of two people. If the first one earns a steady income of £2,500 a year for seven years he would have earned £17,500 at the end of that period.
On the other hand, take a creative writer—and this is quite a common case—who may earn the same amount in seven years but does not earn it in such even sums as the other person who may be a Civil Servant or director of a commercial firm. He may earn it in more uneven sums. He might earn an average of £2,000 a year for the first six years, and may have the luck in the last of the seven years to have a book which is outstandingly successful and which might earn £5,500 for him in that one last year. That would make the same total as the first man—£17,500—but, because we penalise the creative artist, he will have to pay £649 10s. in Surtax over that period, whereas the man who is in the humdrum, regular, safe, secure occupation will pay only £350 in Surtax. So the man who has something of a different quality to offer to the community, and is bound to rely on his own speculative enterprise, is penalised to the extent of about £300 for doing so.
This Clause, as my right hon. and learned Friend has said, is designed to allow him to spread any sudden increase back over any of the six years he chooses to put him in the same position as the man who earned the same amount of money more evenly. Perhaps this Clause is a


little wide. But there is a precedent for the spreading back of receipts, and that is in Section 24 of the Finance Act, 1944. That allows anybody who has written a literary, musical or dramatic work of art, or has produced some other work of art to spread any lump sum back up to three years provided he has taken three years to produce that work of art, or over two years if he has taken two years.
In the case of authors, the original lump sum may not bear any relation to what the work of art may earn in the first year it is on the market and, as the Tucker Report says, it works particularly unfairly against authors. I would just like to quote from paragraph 85 of that Report:
One class which is perhaps more exposed than most to fluctuations is that of authors; thus a particular book may enjoy a spectacular success, and substantially the whole of the royalties may be received in a single year; even though the author does not repeat his success, so that his literary profits in the years before and after are small or non-existent the high rates of Surtax take away by far the greater part of his reward.
It refers to Section 24 of the Finance Act of 1944, which I have already mentioned, and adds that
this provision may have the effect of giving relief in a limited number of cases; it does not touch the general problem for it is directed to quite a different point, namely, that of relieving cases where the fruits of one or more years' work are enjoyed by the receipt of a lump sum payment in a single year, and further it does not apply to ordinary royalties.
Of course, all this was relevant to my Amendment which has not been called.

Mr. E. Fletcher: Would my hon. Friend continue with his quotation and read the next two sentences?

Mr. Wyatt: If I read the next two sentences I shall have to read the next five paragraphs in order to put those sentences into context; and since I do not wish to keep the Committee here all through the night, I think it as well that I get on. Might I also add that I feel almost obliged to claim the privilege of a maiden speaker in asking not to be interrupted as I proceed with these technical points?
I should like to give some examples of how unfairly this provision operates; and these examples are all of actual authors

whose names are very well-known. But, for various reasons, I do not wish to disclose them; they were all obtained from the Society of Authors, which is the most representative organisation of authors in the country, and of whose executive committee I have the honour to be a member.

Mr. E. Fletcher: Why?

Mr. Wyatt: I am asked why; it is because I am the first person in this Committee ever to put this case. It is a good thing to have somebody on the committee to be here to make that case known.
The first example which I wish to give concerns a novel which took three years to write, and for which the author received an advance in royalties of £1,800 from publishers in Britain and abroad. In the first year of publication, there was £4,000 in addition, in royalties, in one single year; but this author was only allowed to spread back the original lump sum of £1,800—the advance payment—and not the £4,000 which he received in the single year. In the years when he was writing the book his earnings from literature were comparatively negligible.
Secondly, I would quote the case of a historical work, which occupied three years in writing. This author had a publisher who was neither bold nor generous, and who gave him only £100 as advance payment. In the first year of publication, £640 was earned in royalties, and over the three years this author could only spread back the original £100, and not the £640, which was treated as income for the year in which it was received.
Thirdly, a novel which in the first year of publication made £5,800 in royalties, but the author was unable to claim anything while writing it, and he paid income tax on the £5,800 in a single year.

Mr. Crosland: I am certain my hon. Friend read the new Clause he is supporting; but if he reads it more carefully he will find that the example he has just given is not covered by the Clause.

Mr. Wyatt: My hon. Friend is quite wrong. I was referring to a person receiving an advance of £100 and who then earned £640 in the first year in which the book was in publication. Of


course, he did not only depend on literature for his livelihood. If he had done so at this rate of income he would have done badly. It was the £640 which brought him into the Surtax class.

Mr. Crosland: Then my hon. Friend should have given us more details.

Mr. Wyatt: If I mentioned every detail in the life of these authors we should be here a long time.

Mr. Ede: It would be much more interesting.

12.30 a.m.

Mr. Wyatt: The next case is that of a writer whose normal income from writing is about £300 a year. He had an isolated success which earned him £6,000 from a book in the first year of publication, but, again, he lost all the benefit. Those examples show how frequent is the great handicap inflicted on authors from the incidence of our somewhat archaic Income Tax laws. It is crippling artistic endeavour, which is already difficult enough in these days.
In the moments when I have come into the Chamber during the Finance Bill I have heard concessions being made costing the country millions of pounds, concessions in relation to something called E.P.L. which have benefited business men and commercial firms to a vast extent. No doubt they are worthy people, but I am sure that they cannot be any more worthy than the authors and artists upon whom our claim to be remembered in a couple of hundred years' time will depend.
Last year the Chancellor put down an Amendment in similar terms to the one which has unfortunately been ruled out of order this year. I have put down my Clause for precisely the same reasons as he put down his, which were good last year and are good this year. He was aided in this enterprise by the Parliamentary Secretary to the Ministry of Civil Aviation who is now sitting beside him.
If the right hon. Gentleman will not accept the wider Clause which has been moved, I hope he will accept my slightly narrower point. There are some arguable legal points on how to get this in order, but the important thing to remember on the spreading of more sums than the original lump sum payment which authors

receive is that all royalties are paid in a lump sum; publishers pay every six months in a lump sum after several payments have accrued. So it should not be very difficult to make it possible for lump sum payments as well as a lump sum payment to be given the benefit of the spreading device.
Over the years the State has tended for very good reasons to eliminate the possibility of private patronage. I do not think that the private patron ever existed so exuberantly or so generously as is sometimes said, but certainly the private patron did assist many authors, poets and other writers to do very fine work which otherwise could not have been done. As we move on inexorably to making it less and less possible for private patrons to exist, it is the duty of the State to replace the private patron and exercise public patronage in a more intelligent way. I hope the Government will, therefore, give very sympathetic consideration to the spirit behind the Clause.

Sir Edward Keeling: I want very briefly to support the Motion. A Clause of this sort has been advocated for a good many years in "The Times" and elsewhere by an ex-Member of this House, Sir Alan Herbert. He has no personal interest in it, for he does not produce one book in a lifetime: he produces at least one a year and at least two articles or poems every week. But there are people, as hon. Members have indicated, who pour out their whole soul in one book and it would be an elementary act of justice to concede the spirit of this Clause. I hope that the Chancellor who is, I believe, the President of the Society of Authors, will do something about it.

Mr. Crosland: I am neither for nor against this Clause. I am bound to say, from the speeches we have heard, that more clarification is needed of what is intended. We had, first of all, a speech of studied moderation from my right hon. and learned Friend the Member for Neepsend (Sir F. Soskice), which was delivered in all good faith and prejudiced me in favour of this Clause. But this was followed by a speech from my hon. Friend the Member for Aston (Mr. Wyatt), which I can only describe as extremely arrogant and which has prejudiced me very much against the Clause.
My hon. Friend said that we ought to be engaged in "nurturing those engaged in literature." He described himself as a creative artist, one of the people whom we should be engaged in nurturing. But why should we nurture my hon. Friend? The only modest thing which my hon. Friend did was to declare his interest in the Clause at the start. Judging from his writings in the "Daily Herald" and "Tribune," and elsewhere, I should have thought that that was totally unnecessary, because I see not the slightest chance of his coming under the scope of this Clause whatsoever.

Mr. Wyatt: I did make that clear at the beginning: I explained that I thought it would never apply to me.

Mr. Crosland: My hon. Friend is in agreement with almost all the serious critics of his own literary work. The purpose of this Clause, as I understand it from my hon. Friend, is to isolate those people who are engaged in non-humdrum and unsafe occupations as opposed to those in humdrum and safe occupations; and the definition of a non-humdrum unsafe occupation is that of writers and those engaged in the arts. But why leave out a group which is subject to all these risks and fluctuations, namely, Members of Parliament?
It is all very well for my hon. Friend the Member for Aston, with a majority of 45,000. It is perfectly clear that in his case politics is a humdrum safe occupation; indeed, he carries it out in a particularly humdrum and boring manner. My right hon. and learned Friend the Member for Neepsend tried to make this Clause attractive by confining it to writers. It is perfectly true if we take this Clause as only applying to writers who are carrying on the cultural tradition of the country, and so on—articles to the "Tribune" and the "Daily Herald"—we can certainly make it very attractive. But the Clause as worded is not confined to writers at all. It includes the expression "in any of the arts."
I wish seriously to suggest that the expression "in any of the arts" is, to say the least of it, ambiguous. Rumours have been circulated as to what induced my right hon. and learned Friend to propose this Clause. Just take the most simple of these cases. It is quite clear

that actors and actresses would be able to put in a perfectly fair claim to be considered as coming under the phrase "any of the arts." First of all, we exempt actors and actresses in serious Shakespearian drama. Having done that, all the other actors and actresses on the London stage would bitterly complain and say that they should be included. We cannot distinguish between serious and un-serious actors and actresses; we have to include them. Having done that, film stars say you must include film actors and actresses; so all film stars have to be included. As soon as that happens, music hall stars would claim to be included on the same grounds. It may be a good thing, but I want to know where it stops.

Mr. Wyatt: What we want to know is where it starts—not where it stops.

Mr. Crosland: Well, it is perfectly clear it starts at my hon. Friend.
If we take this expression "in any of the arts," what is the first and most obvious of all the arts? The art of government. Many people would think that was not being exercised in a particularly creditable manner in recent legislation, but it is quite impossible to go into that matter now. The Chancellor could claim that he was exercising the art of government—by introducing the Budget several weeks too early, altering the date, introducing a nonsensical tax, and then amending it. All this can be called the art of government. I personally would be sympathetic because if it is not an art, the only other thing it could he would be a science—and it could not be that. 
There is the serious case where the present Chancellor of the Exchequer is Chancellor for one year only. This will probably happen this year. The right hon. Gentleman and his followers will have one year of office. We know from the speeches made from the other side of the Committee that all right hon. Gentlemen opposite were impoverished members of the lower strata. Before they became Cabinet Ministers they were living on £600 or £700 a year, or whatever it might have been. All these right hon. Gentlemen who will be in power for a year at the most on present indications, if the local elections are any guide, will benefit under this Clause.
12.45 a.m.
I do ask my hon. Friend and my right hon. and learned Friend whether they have considered the significance of what they are doing. Have they the slightest idea of what they are doing because that is, in fact, what will be the consequence. My own view is that if it is possible to find a wording which can genuinely be confined to writers and artists in the normal and proper sense of the words then I can see a case for giving an exemption, but I am extremely nervous of suggestions of alleviation of Surtax which are made in as loose a manner in such phrases as "in any of the arts."
The Millard Tucker Report has already been mentioned. My hon. Friend the Member for Aston, whose speeches on foreign affairs have a clarity and honesty which do him credit, but which have not been apparent in his speech tonight, quoted two sentences from the Report. He was then interrupted by my hon. Friend the Member for Islington, East (Mr. E. Fletcher), who asked him why he did not read on. The hon. Gentleman replied that if he read on he would have to read five more pages. Why not? Why did he not read on?

Mr. Wyatt: Because a series of mathematical examples are given over the next five pages on how the recommendations would help authors in exactly the same way as we are trying to do in this Clause, and it would have taken too long to read them all.

Mr. Crosland: I am sorry that my hon. Friend chooses to be flippant. If he had read on he would find this sentence:
There are many other professional persons, business men, farmers and the like….
This is really a serious point. One can either exempt writers, artists, and such like, and they alone, on the grounds that their incomes fluctuate, or make this concession to all people, including all business men, farmers and professional men whose incomes fluctuate. Which do we want? I do not think that my hon. Friend or my right hon. and learned Friend made it clear. I would support a Clause which genuinely restricted the concession to writers and artists, but without hearing more powerful arguments than have been produced I would be against any concession to all commercial and business men.
Because I regard this Clause as the thin end of the wedge, and one bound to be extended, I am extremely suspicious of it. I am sorry to see two hon. Gentlemen, respected, as they are, for different reasons, on personal as well as political grounds—one of them having taken a consistently useful part in our discussions and the other having made a slightly belated appearance—supporting a Clause which may be extended to include a general concession which would make the rich richer—although it would not make my hon. Friend the Member for Aston any richer unless the whole standard of his writing improves. Such a Clause would be wholly undesirable on social grounds and unless I hear stronger arguments in favour of it I cannot give it my support.

Mr. Maudling: I fear that after the speech which we have just heard what I have to say will inevitably sound humdrum. I shall try to make up by brevity what I shall lack in wit. We had, first, from the right hon. and learned Gentleman the Member for Neepsend (Sir F. Soskice) a cogent argument in support of this new Clause. We then had a maiden incursion into these matters by the hon. Member for Aston (Mr. Wyatt), who made a vivid speech in support of a new Clause of his own which, though not actually before us, bore some relation to the one which we are considering.
The Government have a good deal of sympathy with the reasons behind this new Clause. Undoubtedly, when Surtax rates are very high, as they are at present, this bears hardly on people whose incomes fluctuate from year to year. That, I think, goes without argument. This Clause is subject to certain technical defects which I think the right hon. and learned Gentleman himself rather suspects.
There is, of course, the question of definition to which many hon. Members have referred, and especially the question of whether a music hall artiste would fall within or without. I wonder whether all hon. Gentlemen are inclined to be quite so supercilious about music hall turns. I find it difficult to say whether or not they should be included within the definition. The suggestion of the sixth year would enable a taxpayer to allocate part of his income back into a year which, by the effluxion of time, would be beyond


assessment. Those are technical difficulties.
To turn to the principle, the Government feel that there is a great deal of force behind the general argument. It was referred to by the Millard Tucker Committee. The Government consider the proposal of that committee, along with other proposals, in framing the Finance Bill this year.
As the Committee knows, a number of the proposals of the Millard Tucker Committee have been accepted and embodied in the Bill. This one was not accepted, for two reasons: first, because the proposal of the Committee did not flow from a comprehensive review of fluctuating incomes but only of fluctuating incomes within the limited field of trade and the professions. Secondly, it was not accepted because the Millard Tucker scheme would be most complicated to work and expensive in staff in practice. We suggest that those are two strong reasons for not including a proposal of this character in this year's Finance Bill.
The new Clause advanced by the right hon. and learned Gentleman, apart from the minor technical matter to which I referred, differs from the Millard Tucker proposal in several respects. In one way it is wider than the Millard Tucker proposal, because it brings in certain people in Schedule E as well as Schedule D. In other ways it is more limited, because it applies by no means to all professional people but only to certain professions. It is worth bearing in mind that the problem of fluctuating incomes applies not only to people who draw their living from the arts, but also to many people who are in trade or the professions.
Take, for example, underwriters and others whose income fluctuates inevitably from the nature of their occupation. Because of that fluctuation they suffer under the disadvantage that the total amount of tax they pay on their total income for a given number of years is higher than the amount of tax paid by another person earning the same total on a regular annual salary. They suffer from this disability, but they are not covered by this proposal.
Also, it is true to say that while some employees—research workers, for example—are included, this is only a

small number. There are many other employees, especially people employed on commission, who suffer from these fluctuations and who would equally deserve consideration if a Clause of this kind were embodied in a Finance Bill.
The Government considered this general problem carefully. They considered the Millard Tucker proposals, and they also considered this new Clause which, in some ways, did not commend itself quite so much to the Government because it is not so comprehensive. My right hon. Friend does not consider it possible to introduce legislation of this character this year, but that by no means rules out the possibility of legislation on these lines in future. The Government will certainly consider this problem and in doing that they will draw much benefit from the argument put forward tonight from both sides of the Committee. In those circumstances, having explained the attitude of the Government to the principle involved, I ask the proposer of the Clause to consider whether he will withdraw it.

Mr. Wyatt: Would not the hon. Gentleman meanwhile—it is a very simple matter—make Section 24 of the Finance Act, 1944, work more effectively and fairly?

Mr. Maudling: That is a rather different matter from the question now before the Committee, which is that this Clause should be added to the Bill.

Sir F. Soskice: I am grateful to the Parliamentary Secretary to the Ministry of Civil Aviation for what he has said. I quite understand that a proposal of this sort is, in some respects, far-reaching because of its implications on the general structure of the Surtax scheme, and that it requires careful thought. I am grateful to the hon. Gentleman for saying he will give it that thought, although he cannot undertake to introduce any provision this year to give effect to it.
I, personally, think that there is quite a strong case, although there may be arguments against it, for introducing the principle which is embodied in the Clause in relation to all fluctuating incomes. I have in the Clause endeavoured to embrace only a very limited number of persons. The reason for having those persons particularly in mind was that,


from such information as one sees in the Press, and so on, those were the persons who, I thought, were particularly affected: namely, authors, who in a particular year may have a big success with some work that they produce, although they may have had many lean years before and although they may have had to work for a number of years to produce the work which produces the income.
My hon. Friend has poured a certain amount of, perhaps, merited scorn on the words I chose in going beyond the description of authors. As far as I am concerned, I should have thought that people like singers, certainly serious actors, had a very strong claim also, and I should have desired to include them. Questions are asked about music hall actors, and so on. I do not feel so strongly about them, although I think they have a claim.
The definition, I agree, is the most difficult part of the Clause. I think the present definition in Section 471 of the Income Tax Act is too narrow. It would obviously exclude people like singers and pianists. I think they have a strong claim to be included. Therefore, I did not use the definition from that Section but sought to go without it.
I do not think that the words "engaged in any of the arts" is so difficult to eschew as my hon. Friend suggests. I am not wedded to those words, and if better words could be chosen I should be very ready to see them adopted. I simply put these forward as a suggestion in order that they might receive consideration, because, obviously, if one is to have a Clause on these lines, one has to consider very carefully the exact ambit of the persons who are to be within it.
Authors certainly, I think, ought to be within it. I should like to see people like pianists, singers and artistes also within it. When one goes beyond that, one is, perhaps, on more controversial ground. One point which has not yet been raised, and which I certainly do not put forward, is that a barrister is a person who practises in any of the arts. In view of what the hon. Gentleman has said, I conclude by asking leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.

New Clause.—(WINES.)

Section four of the Finance Act, 1949 (which in lieu of the duties of customs charged on wines under section three of the Finance (No. 2) Act, 1939, charged the duties at the rates set out in the Second Schedule to the first-named Act), shall have effect as if in the said Second Schedule the expression "light wine" meant in every case wine not exceeding twenty-seven degrees of proof spirit, and accordingly for the last paragraph of the said Schedule there shall be substituted the following paragraph:—
For the purposes of this Schedule, the expression 'light wine' means wine not exceeding twenty-seven degrees of proof spirit"—[Mr. Nicholson.]

Brought up, and read the First time.

1.0 a.m.

Mr. Godfrey Nicholson: I beg to move, "That the Clause be read a Second time."
I do not exaggerate the importance of the Clause and I shall be very brief in dealing with it. I apologise to the Committee for keeping up hon. Members even for a few minutes at this hour on such a minor matter. I must declare my interest in that I am a wine merchant.
This is the point of the Clause. Wines imported into this country are classified either as light or fortified, and they pay different rates of duty accordingly. Occasionally a few French wines, very good Burgundies or Rhone wines, and sometimes exceptional Sauternes, Chateau Yquem, and so on, are just a little over-strength, and fall into the higher rate. But in actual fact they do not pay the higher rate, for the shippers do not import them in those circumstances. The object of this Clause is to give a little extra margin.
The effect of the Clause, if adopted, would not be to entail any loss of revenue to the Exchequer, but we in this country would get a few better quality wines that we are not now getting. That puts it as briefly and simply as it can be put. The Clause is generally desired by the wine trade as a whole, although I cannot claim to speak on their behalf.

The Solicitor-General: My hon. Friend began by disclosing the interest he had in this subject. I feel that for reasons I need not specify I should disclose an interest in all the actions and omissions of my hon. Friend, apart from the interest one has as a very occasional consumer of the liquid now under consideration. After


what I said about water recently, I dare say my hon. Friend is quite hopeful about the result of my proceeding from water to wine. I am afraid I must disappoint him. The question of the line of demarcation between light and heavy wine involves a great many technicalities. It has varied from time to time since it was first imposed in 1861.
The purpose of drawing the line was to distinguish between natural wines and fortified wines, and it has varied both upwards and downwards since that time. In 1927, the figures were put at their present level—namely, 25 degrees Continental wines and 27 degrees Commonwealth wines. The then Prime Minister said that the object of the change should be a dividing line when wines entering the country contained any spirit beyond that produced by the natural processes of fermentation.
No dividing line could wholly achieve that purpose. My hon. Friend has suggested that this alteration would not entail any loss of revenue to the country. I rather doubt that, having regard to the course of trade after the alteration made in 1927. The effect of having a different level for Commonwealth as opposed to Continental wines led to a considerable increase in consumption of Commonwealth wines, and the elimination of that difference now might have an appreciable effect on the consumption of Commonwealth wines and an effect on the revenue from that source.
It is a rather difficult technical matter, and, of course, it has repercussions not only on the interest of the revenue but also on the relative position of different sections of the trade in this country, as well as, to some extent, our commercial policy as a country. For these reasons I am not in a position to accept my hon. Friend's proposal, but I can say that we are perfectly willing to consider this technical question again, in consultation with the trade, before next year.

Mr. Nicholson: I thank the Solicitor-General for what he said and for the promise to reconsider the question. I do not think that what he said about the possible loss of revenue will stand up to examination, but by all means let us have an examination. If I am right, no doubt the Govern-

ment will yield another year. I beg to ask leave to withdrawn the Motion.

Motion and Clause, by leave, withdrawn.

New Clause.—(EXEMPTION FROM DUTY OF CERTAIN AGRICULTURAL IMPLEMENTS AND FERTILISERS.)

Goods imported into the United Kingdom of the categories specified in the Schedule (Agricultural implements and fertilizers to be imported free of duty) to this Act, being articles used as implements or fertilizers in agricultural production, shall be imported free of duty.—[Mr. Grimond.]

Brought up, and read the First time.

Mr. Grimond: I beg to move, "That the Clause be read a Second time."
The purpose of this new Clause is to exempt from import duty certain fertilisers, insecticides and agricultural implements. I am encouraged to think that I shall be supported by the hon. Baronet the Member for Gravesend (Sir R. Acland) who, in a previous incarnation, moved a similar Clause some time ago.
I must confess that I am not an out-and-out free trader. I can well understand that there will be times when it is necessary to control imports in the interests of the stability of the economy, and I quite concede that at this present moment, in the economic circumstances in which we find ourselves, it is certainly necessary to have some such restriction on imports. Nevertheless, I think it is generally acknowledged that it is in the interests of this country that there should be far greater freedom of trade than there is at this moment, and that if the world as a whole is to prosper, raise its standards of life and live in peace, we have to get rid of a great many of the present impediments to trade.
We have recently had some rather pungent examples of the vicious effects of trade restrictions. We have indulged in them ourselves and we have certainly suffered very much from what has been done by Australia and what is being done by America. The game of "Beggar My Neighbour" proceeds merrily, and I think we have to realise that in that game this country is particularly vulnerable.
There is a further point with regard to tariffs, which hon. Members will be relieved to hear that I do not intend to go into in detail, and that is that if we must restrict trade, it may be that a


quota or licensing system would be a better way of doing it than the imposition of an import duty. I do not know what is the view of the Government on this new Clause. Whoever is going to reply—and I rather think that we may have a new spokesman from the Treasury Bench at this late hour—has very naturally not yet unmasked his batteries, and I do not know what form his counter-fire will take; but if he is going to argue that it is necessary to have the revenue from these duties he is admitting that the goods on which they are imposed are necessary for this country, that they are to be imported, and that the farmer is going to have to pay a higher price for them.
If, on the other hand, he argues that the retention of these duties is to protect home industries then, to that extent, he is arguing that these goods ought to be excluded, and it may be that the best way of excluding them is by some form of licensing. He may, of course, argue that in any case not much harm is done by these duties. If that is so, we should get rid of them, because if the best that can be said of them is that they do no harm, that seems to me to be a bad argument on the face of it.
I am aware that these duties are so venerable that their respectability is taken for granted. I am also aware that there are opportunities for anyone who objects to these duties to make out a case for their removal. But in these days the Treasury takes—rightly, in my view —direct responsibility for import duties. As these duties affect everyone in the extremely important question of food production, I do not accept the argument that they should continue until some interested party takes some objection to them. I do not think it is right that this sort of import duty should be determined by the pressure of various groups of people who have an interest in the particular commodities. I think it is the duty of Parliament to bring them into the light occasionally and have a look at them to see if they are still needed.
Whatever the reasons for these duties, the onus lies on the Government to make out a case for them, and it is for them to show that there is justification in continuing with them today. The particular groups with which this Clause is concerned fertilisers, farm machinery and

implements, are subject to special reasons for examination. The whole of our attitude to agriculture, and our whole agricultural policy, has completely changed since most of these duties were imposed. Today we need to get as much food as we can from our own countryside, and to get it we are prepared to take special steps and give special help and assistance to the farmers. Surely, it is clearly in the interests of the country, the farmers and the consumers that the costs of agriculture should not be unnecessarily increased. Surely, at the present time while, we are exhorting farmers to produce more no one would want that.
The country is already paying out large sums in agricultural subsidies, and it is only recently, rightly in my opinion, that we accepted a large increase in the Annual Price Review. But I wonder if the country realises that while this money is being paid out on the one hand to farmers who are being asked for greater production, on the other hand we are continuing duties which can only result in putting up the price of the farmer's tools of the trade, or alternatively preventing them from obtaining them at all.
What is the case for £4 a ton duty on certain fertilisers, for 33⅓ per cent. on acetate of lime, for 20 per cent. on insecticides, or duties from 15 to 30 per cent on such things as ploughs, tractors, separators, shovels, forks, reapers and many other agricultural implements? There is also a particularly heavy duty on wire. Small farmers are finding costs extremely heavy. Taking the example of wire, the cost of fencing is an extremely big item for many farmers, and the fact is that these duties must increase the cost of farming, and particularly that of farmers trying to bring under cultivation hill and marginal land.
I would remind the Government that we have recently passed an Act by which a subsidy can be paid not only to the users of fertilisers but also to the producers. Yet, while we are prepared to pay a subsidy to the producers of fertilisers, we are retaining a duty on fertilisers. I must say that I think we should inquire whether the system of import duties is in any way now a useful part of our policy for agriculture or indeed trade. There is one other argument in defence of tariffs, and that is that they are


necessary to protect weak or growing industries. But as far as the industries affected by these duties are concerned, they seem far from weak. The biggest firm of fertiliser manufacturers in this country is Fisons—a most efficient firm. Their profits rose in 1951 from £550,000 to £780,000. Ford's profits rose by £200,000 and the dividend was increased. I personally make no complaint about that. I do not say that the profits are excessive. They may in fact be no more than adequate compared with the fall in the value of money. But it is obvious that these are not weak struggling companies which need the protection of tariffs. Again, we should all like to see foreign implement makers prosper in this country, and I would do everything to encourage them. But do these import duties help, duties which were imposed long before such companies as Massey-Harris or Deeres came here? They came because they wanted to break into British markets and perhaps because we could not find dollars for implements made in America or Canada.
I certainly think that there is a case for saying that this Committee should scrutinise these sorts of duties and weigh up the effect on agriculture and, what is more, on consumers. It should further consider whether they are desirable as part of the trading policy of this country.

1.15 a.m.

Sir R. Acland: After the most able speech which has just been made, there is not much for me to say; but I happen to be the only surviving Member of this Committee who supported a new Clause moved in almost identical words by my father 15 years ago. Mr. Wedgwood Benn, as he then was, having left the Liberals, and joined the Labour Party, read some sentences on free trade in a pamphlet written by the then Sir John Simon. I mention that in passing, but it does seem to me that the principles behind this new Clause are as sound today as they were then, when the Conservative Party refused to accept them.
We do not know if the present Conservative Government are going to resist this Clause; but if it is resisted on revenue grounds, then I would say that we are paying out subsidies of different kinds; and if it is on the balance of payments issue and there is the question

of machinery from dollar countries, I can understand it, although that position is surely better dealt with by some form of quota. If we are going to allow in goods from any foreign country at all, then those goods which we allow in should be those which help our own food production.
We do not have the complete monopoly in ingenuity in agricultural machinery, and to increase ever more and more our food production those producers should be able to send over goods without charge of duty so that our farmers can learn more, and produce more, and our manufacturers can learn from them. For these reasons, among others, I would support this Clause, and express the hope that we shall not have to move it again in another 15 years' time.

The Parliamentary Secretary to the Board of Trade (Mr. Henry Strauss): The hon. Member who moved this new Clause did so with commendable brevity and persuasiveness. I shall try to show him and, I hope, the Committee, why the new Clause for which he asks should not be passed. The hon. Baronet the Member for Gravesend (Sir R. Acland) who supported it, did so on the historical ground which he explained, and he would have carried more conviction had he not abandoned the Liberal Party.
The hon. Member for Orkney and Shetland (Mr. Grimond) said that he was not an out-and-out free trader, although he did give some of the recognised arguments for free trade; and I do not want to be tempted into giving some of the equally well-known arguments to the contrary if they are not necessary for a decision of the matter before the Committee.
The hon. Member who moved the new Clause said, quite rightly, I think, that, although the particular commodities referred to in the new Clause and set out in the new Schedule concerned agriculture, his argument was more general and applied to trade generally. We must, therefore, consider his proposal in the light of the general considerations which he admits are involved.
The first point about this new Clause is that it is unnecessary, since these or any other commodities can be added to the free list if such an addition is thought desirable. The duties on these commodities are imposed under the Import


Duties Act, 1932, as modified by the Import Duties (Emergency Provisions) Act, 1939. The effect of that legislation is that an addition to the free list, that is to say, the list of goods in respect of which duties are not to be charged, can at any time be made by Treasury Order. Under the legislation as it now stands that is done by the Treasury in appropriate cases on the advice of the Board of Trade. In order to remove a duty on any of these articles it is not necessary to add any such Clause as this to the Finance Bill.
If, however, such a Clause is not necessary, I think the hon. Member will realise that it is also undesirable, for this reason. At the present time, before any change is made in the tariff, all persons concerned, consumers and producers, are given an opportunity of stating their case and making their representations. Surely that is a desirable thing, and it is certainly desirable that people should be treated alike.
The hon. Member would not think it fair that the producers and consumers of one particular set of commodities should be deprived altogether of the opportunity of making their representations and having their case heard and considered. That would be a very great alteration and, I think, an undesirable and unfair alteration in the principles on which the Departments have always acted in this matter. It is the view, I think, of both the principal parties in this country that changes in tariffs ought to be considered on their merits.

Sir R. Acland: Who does the hearing and considering of the case put forward by the parties represented? Is it a Treasury official or a Board of Trade official now?

Mr. Strauss: Under the original Act the Import Duties Advisory Committee carried out those duties, but now these matters are dealt with on the advice of the Board of Trade who give an opportunity to all concerned to make their representations.
The hon. Member for Orkney and Shetland asked my right hon. Friend the President of the Board of Trade on 13th March:
… whether he will abolish the tariff on imported fertilisers.

My right hon. Friend replied:
I am always prepared to consider any application which may be made to me for the adjustment of tariff rates. In considering such applications, it is, of course, necessary to take account of the interests of both producing and consuming industries." —[OFFICIAL REPORT, 13th March, 1952; Vol. 497, c. 147.]
I cannot think that that proposition can be disputed. To say that as regards a particular class of commodities the people concerned should be excluded from all consideration would be a great change and would have wide repercussions.
I would add, since it is a matter which the Committee would wish to bear in mind, that no application is now under consideration, because no application has been made, in respect of any of the articles mentioned in the schedule listing the articles to which the new Clause refers. It seems to me that, if there were a case from the point of view of the consumers such as the hon. Gentleman suggests, it is at least probable that somebody would have thought fit to make an application for a change.

Mr. J. Edwards: Will the hon. and learned Gentleman tell us the status of the persons or bodies who would make the application? What test would the Board of Trade apply if an application were made? Could they in some circumstances refuse, or can anyone who is interested make an application?

Mr. Strauss: I would not say anything which would prevent the Board of Trade from refusing consideration to an application that was clearly frivolous, but, apart from that, every responsible application is considered.
Therefore, on the ground that the Clause is not necessary to achieve the placing of the articles on the free list if that were desirable, and on the ground that, if it is not necessary, it is also not desirable, the Clause should be resisted. Whatever the views of the hon. Member for Orkney and Shetland are on the classic argument of free trade or protection, he will not wish to introduce an injustice by insisting on a new procedure for one class of articles which does not apply generally, especially since he has admitted in his speech that the case which he has presented applies to trade generally. For those reasons I ask the Committee to reject the Clause.

Mr. Grimond: I do not feel inclined to withdraw the Clause, grateful as I am to the Parliamentary Secretary for what he has said. Everything he has said about the methods by which the duties are determined made me more and more suspicious of what goes on in the dark corners of the Board of Trade. It may be that the interests concerned should have every opportunity of stating their views, but the producers, consumers and wider interests in the country should have even more opportunity of stating theirs.
While I fully accept that in certain cases import duties may be necessary, I think the bias lies against them, and I had hoped that the Parliamentary Secretary would have given some justification for these particular duties. I am not entirely convinced by the argument that anybody can object to them. The farmers are very largely concerned here, but because they are regularly recouped at the Annual Price Review for the extra costs involved they may be reluctant to make any undue fuss. In these circumstances, whilst I am grateful to the Parliamentary Secretary, I do not feel inclined to withdraw the Clause.

Question put, and negatived.

New Clause.—(AMENDMENT AS TO REGISTRATION FOR PURCHASE TAX.)

Section twelve of the Finance Act, 1944 (which empowers the Commissioners to except a person from registration when tax on his purchases would be not less than tax on his sales) shall have effect as if there were inserted at the end of subsection (1) thereof the following proviso:
Provided that the Commissioners shall not refrain from registering, or cancel the registration of, any such merchant or manufacturer as aforesaid unless

(a) they are of opinion that owing to special circumstances it is desirable that they should so do, or
(b) they have given notice to such merchant or manufacturer of their intention to exercise their powers under this subsection and he has not, within a period not exceeding three months from the giving of such notice, notified the Commissioners that he objected to their so doing.

For the purpose of sub-paragraph (a) of this proviso, the expression 'special circumstances' shall not include greater ease of the administration of purchase tax."—[Mrs. Castle.]

Brought up, and read the First time.

1.30 a.m.

Mrs. Barbara Castle: I beg to move, "That the Clause be read a Second time."
This Clause seeks to amend certain arrangements for registration for Purchase Tax. It is an attempt to remedy an injustice in the way in which Purchase Tax is collected which threatens the livelihood of a number of wholesalers. I am glad to see the hon. Member for Edinburgh, South (Sir W. Darling) in his place because, with his wide knowledge of the trade and his well known enthusiasm for championing a good cause, I expect to have his support tonight.
Section 23 of the Finance (No. 2) Act, 1940, provides for the purpose of collecting Purchase Tax that every manufacturer or wholesaler who sells chargeable goods shall be registered, unless the sale of chargeable goods is less than £500 a year. The actual charging of tax takes place at the point where the registered firm sells to an unregistered firm. For example, when a registered manufacturer sells to an unregistered wholesaler or a registered wholesaler sells to the retailer. This arrangement, on the face of it, seems a reasonable one, but there is a snag in it. Under Section 12 of the Finance Act, 1944, discretion is given to the Customs and Excise to refuse registration where they choose to do so. The effect of this Section was brought to my attention in a rather dramatic form in a case arising in my own constituency.
A few weeks ago a wholesaler who lives in my constituency came to see me to tell me that he was in extreme difficulties as a result of the introduction of the D scheme. Prior to the Budget he had no need to register because, although his total sales were well over £500 a year, they consisted almost entirely of Utility goods which were, of course, free of Purchase Tax. Therefore he did not need to be registered and the matter did not arise under Section 12 of the Finance Act, 1944.
Then, on 17th March, he suddenly found he was facing an entirely new situation, because on that day the D scheme came into operation, the old Utility scheme was abolished, and the bulk of the articles he sold—ladies' and men's wear—had become chargeable to tax as a result of the introduction of the D scheme. He wrote, therefore, to Customs and Excise and asked to be granted a registration certificate, as indeed he was obliged to do under Section 23 of the 1940 Act. You can imagine


his dismay when the Customs and Excise replied that they were not prepared to register him. Their attitude apparently was that registration should be granted or not granted purely in accordance with the administrative convenience of Customs and Excise in collecting the tax.
In this particular case it suited the Customs and Excise better for the tax to be picked up at the point where the manufacturer supplied my wholesaler, rather than the point at which my wholesaler sold his goods. At first sight it did not seem to make much difference to my constituent, because he hoped that he might be able to make arrangements with manufacturers who were registered for Purchase Tax to be paid at that point, but when he applied to his normal suppliers for goods the majority wrote back and said that they wanted to see his Purchase Tax registration certificate.
My constituent handed me a number of letters from these suppliers, which are typical of the response he got. Here is one from one of his main suppliers:
We very much regret to have to tell you that it is the policy of our governing director only to deal from today onwards with customer registered for Purchase Tax. This is the result of a reply from the local Customs and Excise office to our inquiry about the despatch of goods ordered before 17th March, and not yet sent off. Will you please take all possible steps to become registered and advise us of your Purchase Tax certificate letter number at your earliest convenience.
My constituent phoned this firm and informed them that the Customs and Excise had refused him registration. The firm replied that they very much regretted to hear of the hardship being caused to him as a result of a regulation which prevented him from becoming registered, and wished him all success in his efforts to overcome this handicap. My constituent, being an enterprising man, rapidly got in touch with me, with the results the Committee are now experiencing.
Another supplier wrote:
We should be glad if you would let us have by return your Purchase Tax certificate as this is required to enable us to deliver any goods to you in the future. Customs and Excise point out to us that under Notice No. 78D whoever we supply, whether or not subject to tax, must furnish us with the Purchase Tax certificate before any goods can be invoiced.

There again my constituent got on the telephone in some dismay and told the firm that he had been refused registration to suit the administrative convenience of the Customs and Excise. This firm, too, responded in sorrowing terms and said that they regretted to learn of it because it was a strict rule of the company not to be collectors of Purchase Tax at any time.
A third supplier wrote in similar terms and stated:
We hope you will let us have your registration number. The Customs people know we only serve accounts that are so registered.
The effect of these answers was so startling that my constituent was driven to consult me because his business was nearly ruined. On the one hand he could not secure registration, nor could he secure supplies, because he had not got the necessary Purchase Tax certificate. It is really monstrous that certain wholesalers can be denied registration in this way purely for official convenience, and as far as can be seen for no other reason whatever.
This is not an isolated case, because since I started going into the matter a number of similar cases have been drawn to my attention. There is no suggestion in this case that there is any other reason for refusing registration other than the administrative one. The Customs and Excise find it more administratively convenient not to register the smaller manufacturers in this way, and to force the job of tax collection back to the manufacturer.
But if Customs and Excise plead administrative inconvenience, the manufacturer is entitled to say that he will not be put to the administrative inconvenience of collecting Purchase Tax for these wholesalers. The purpose of my new Clause is simple and straightforward. It lays down that the discretion given to Customs and Excise to interfere with the normal pattern of registration may not be exercised against the will of the trader unless special circumstances are involved.
The Clause lays down that special circumstances for this purpose shall not include administrative inconvenience. I agree that there may be special circumstances in some cases which would make it not in the public interest for a trader's desire to be registered to be accepted.
That we must recognise, and my Clause provides for it. All I say is that it should no longer be possible to deny registration arbitrarily in this way, as has happened in a number of cases, for the administrative convenience of the Government.
Public officials ought not to be authorised to deprive an honest man of his livelihood for no stronger reason than this. I would point out that even in those cases where a wholesaler may not be ruined by the refusal of registration he may be seriously disadvantaged in comparison with his competitors. In those cases where the wholesaler is denied registration and the manufacturer pays Purchase Tax, the manufacturer pays that tax, not on the actual selling price to the wholesaler, but on that price uplifted by a certain percentage which corresponds to the wholesale margin, which is fixed at a national figure on what is considered the wholesale margin.
When trade is bad, the wholesaler who is registered and who, therefore, pays the Purchase Tax himself, may, in order to get business in bad times, cut his own selling price. If he does, the Purchase Tax levied on that selling price is correspondingly reduced. But the wholesaler who is refused registration has already bought his goods plus Purchase Tax calculated on a national wholesale price. Therefore, he has to sell his goods with a higher level of Purchase Tax attached to them.
I find it extraordinarily difficult to understand why that competitive disadvantage should be put on certain wholesalers purely arbitrarily for no kind of reason which is evident from the legislation. These disadvantages generally operate against the smaller man. This matter has become urgent with the introduction of the D scheme. That means that a wide range of textile goods now become chargeable to tax for the first time. The wholesaler who dealt in Utility goods before and who was not bothered about the problem of registration, now comes up against it most sharply and acutely.
My Clause is moderate and reasonable. I suggest to the Committee that it contains every possible safeguard against abuse. This may seem to the Committee to be a comparatively small point, but it is not a small point to the man who

faces ruin in his business, and I suggest that we must legislate now on his behalf.

1.45 a.m.

Mr. Anthony Greenwood: My hon. Friend the Member for Blackburn, East (Mrs. Castle) has made a most convincing and persuasive case. I want to add only one point to what she has said. My hon. Friend referred to the fact that the introduction of the D scheme had made the reform which we propose more necessary, but in fact the Finance Bill makes it even more necessary.
Under Clause 8 (9) the term "chargeable goods" is made to include
any article of a description in respect of which tax is for the time being expressed to be chargeable … notwithstanding that by virtue of this section tax is not chargeable in respect of the article.
That means, quite clearly, that it now includes a wide range of textile goods, even though their wholesale value falls below the D level. The effect of that is that a large number or wholesalers have to register if they want to carry on business in various lines of goods which are, or may become, chargeable under these provisions.
But, of course, it does not follow at the same time that the Commissioners have to give them the registration which they require, and there is, as my hon. Friend said, a good deal of evidence in support of the fact that the Commissioners of Customs and Excise are showing a very marked reluctance to register manufacturers and wholesalers.
I had a letter yesterday from a wholesale merchant, not one of my constituents, who has been refused re-registration although he has been carrying on this business for a considerable time. He is very anxious, because he feels that it is more than ever necessary to be registered if, as has been suggested by some hon. Members opposite, the D scheme will be dropped next year in favour of a general tax on sales.
There is a great deal of force in my hon. Friend's point of view for restricting somewhat the discretion which the Commissioners of Customs and Excise have. Obviously, they must have that discretion, and I think that perhaps it might be rather narrower than at present. I hope very much that the hon. Gentleman will yield to my hon. Friend's persuasiveness as readily as the Chancellor did last night.

Mr. Boyd-Carpenter: As the hon. Lady has explained, the Clause would give, in the absence of special circumstances, a right to registration for Purchase Tax purposes. That, indeed, is its object. Although the point is an old one, it has arisen a number of times in the last few years. It would introduce a radical change in the system of administration of the Purchase Tax as it has been operated under successive Governments from the beginning of the tax.
The issue before the Committee is whether the system so far adopted, of what one might call a selective policy in registration, should be continued, or whether the alternative suggested in the Clause, of giving the right to registration subject to the one qualification about special circumstances—which are not, in fact, defined—should be substituted for it. That is the issue which is posed by the Clause.
The first point that I should like to put before the Committee is this. The reason why under successive Governments the selective system has been operated has been with a view to securing that the collection of the tax is achieved without undue expense or excessive staff. The hon. Lady spoke somewhat bitterly of administrative convenience. What, I think, is meant in this context by "administrative convenience" is not the personal comfort of any individual official. What is meant is whether we are to adopt a system which would force us to employ substantially more officials or, alternatively, to run severe risks of not being able to police the tax.
I hope that we shall discuss this matter, not on the basis that anyone wants to pander to the personal convenience of public servants, nor that anyone should suggest that those public servants want their personal convenience pandered to, but that the general term "administrative convenience" must be considered as at least having some importance from the point of view as to whether we are at this time to run risks with the tax or, still more important, perhaps, to increase the staffs needed to collect it. As the Committee are aware, it is the desire of the Government to effect the maximum possible reduction in Governmental staffs. That is an important factor to bear in mind.
If, as the Clause suggests, registration were given as a matter of right, it is very likely that the number of registrations would very substantially increase. If that were so, substantially larger staffs in the Customs would be required to collect the tax, and that at a time when public economy is a very serious matter—I do not say a conclusive matter, but an important factor.
Then there is the other factor—which I shall deal with in greater detail—of the possibilities that such a system would lead to loss of tax owing to fraud, evasion, or other breaches of the law, which no hon. Member desires to encourage. The present rule has been administered with the broad conception in mind of securing, within reason, that the tax is collected as cheaply and efficiently as possible, but it has also been administered—as hon. Members opposite who have been associated, like the hon. Lady, with the Board of Trade, will be aware—with due attention to trade needs.
There has been no absolutely arbitrary rule that administrative efficiency—a phrase I prefer to administrative convenience—should be the only criterion. Trade needs have been taken into account. That is particularly taken into account where, for example, the person concerned undertakes to some extent export business and where, therefore, it is desirable that goods should be dealt with without having incurred the tax, or where the wholesaler supplies other than registered wholesalers.
But to go beyond this and, as is suggested, give registrations as a matter of right is a very different matter, and it would involve a certain number of dangers that the Committee ought to consider. It would involve the possibility of a considerable spread of the sort of happening of which we have had examples, even under the present system with its safeguards, of wholesalers of a mushroom character obtaining registration solely in order to buy substantial quantities of goods tax free, sell them on the black market, and depart. If it is of interest, I have particulars of four specific cases that have arisen in recent times, where that type of thing has happened, involving the loss of tax of £291,000, £119,000, £100,000, and so on. The Committee will appreciate that if discrimina-


tion in the grant of registration is abandoned the door to that sort of thing is opened very much more widely.
If Customs has placed upon it the duty of establishing special circumstances, it will mean that in fact they will not be able to be certain, when they grant registration, that a certain number of ill-disposed persons, who seek registration solely for purposes of tax evasion, will not be registered, because without an elaborate intelligence system, such as is neither conceivable nor justifiable, it would not be possible in advance to realise in a certain number of cases whether people of this sort were involved.
There is another aspect of the matter. If registration is given automatically it will be inevitably granted in a number of cases that I am about to describe. A number of large retailers have already attempted to set up £100-capital subsidiary companies to buy their goods for them tax free as registered wholesalers, and then hold the goods on the retailers' premises. We have actually had cases where application has been made for that sort of transaction. That, apart from any other point, is grossly unfair to the small undertaker, who is not in a position to go to the extent of forming a subsidiary company and who has to buy his goods tax-paid in the ordinary way.
One of the inevitable consequences of automatic registration would be that the practice already initiated or attempted by some of the larger retailers would spread in some degree. That is a factor which we must consider if we are to try to administer this tax fairly between trader and trader. It is a very difficult argument to establish that we should give automatic registration despite all these difficulties.
Turning to the question of the effect upon the individual trader, it is very difficult to arrange the law on the basis of what may or may not be the private arrangements made by manufacturers. It may be that there are manufacturers such as the hon. Lady has described, who make difficulties about supplying non-registered wholesalers, though I am bound to say that in the present state of some of the trades concerned it seems very unlikely that many manufacturers would refuse orders merely because the person putting them was not registered.
It is always possible—though I do not say that it applies in the case which the hon. Lady has in mind—that non-registration might be used as an excuse where the real reasons for refusing to supply might be based on different considerations. When we discuss the question of trade interests of this sort we are in the realm of some uncertainty, but it seems unlikely that, in the trade recession of some of the trades particularly concerned, the manufacturer would cut off his nose to spite his face by refusing to supply goods when he had a willing buyer, merely because the buyer was not registered.
I think there is some force in what the hon. Lady says with regard to the consequences of the D scheme, because that does mean that some traders who have previously dealt wholly in Utility goods come within the ambit of Purchase Tax for the first time. The hon. Lady has referred to a number of cases arising in the town which she represents. I understand that this matter has been particularly raised there, and I know that a number of hon. Members have raised this question. Although the hon. Lady did not tell us—perhaps because she did not know—one trader who had been refused registration took his appeal to the Board of Customs and Excise and registration has now been granted.
That is an important point, because it indicates that this system is not being administered with inflexibility or with selfish concentration on administrative convenience. The Board of Customs and Excise are prepared, as they always have been, to consider individual cases on their merits. I would go further and say that, bearing in mind the special circumstances arising from the operation of the D scheme in this respect, I can tell the Committee that, consistent with the general policy which I have outlined, we are perfectly prepared to consider individual applications on their merits.
As some hon. Members who are present this evening realise, I have had correspondence with them and, in some cases, when the matter has been further considered, registration has been given. That, I think, is an indication that we are not at all arbitrary about this matter and that we do realise that it is a question of holding a balance between the avoidance of excessive staffs and the risk of losses by fraud on the one hand, and,


on the other hand, the avoidance of so administering the tax as to cause undue hardship to particular traders.
We do take into account trade considerations, but that is not the same thing as giving registration as of right, which seems to me to be a proposition bristling with difficulties. But, subject to the general outlines of the policy, I can repeat that we are prepared to treat individual cases on their merits, either by way of representations made by the traders themselves to the Board of Customs and Excise or, if hon. Members themselves are interested, by correspondence on the normal basis with my right hon. Friend the Chancellor or with myself or my right hon. Friend the Minister of State for Economic Affairs. [Interruption.] If the hon. Gentleman the Member for Cardiff, South-East (Mr. Callaghan) desires to correspond with my right hon. Friend he will receive a courteous and helpful reply. Certainly it is the better way to deal with this matter.
2.0 a.m.
We make no complaint about this important question being raised on this new Clause. I hope I have made it clear that I realise there is a point of substance here with two closely balanced considerations to he weighed against each other. I think the middle view between the extremes of automatic registration and the efficient collection of the tax is the right way to handle this matter. This is the way in which we intend to handle it, and I hope that it will indicate that we do desire to deal with this matter in no inhuman or arbitrary spirit.

Mr. Jay: I agree with the Financial Secretary when he says that this is not a question of personal convenience of the Customs and Excise. I also agree that there are varied reasons which have prevented all Governments, since Purchase Tax was introduced, from granting registration automatically to anybody who asks for it. I cannot, however, say that I was convinced by what the Financial Secretary said about the situation, which has arisen since the introduction of the D scheme.
The Government have taken the responsibility for introducing the D scheme, and for insisting on depressing the D levels very much lower than we would have sought to put them. As a result,

a very large volume of goods, textiles in particular, has been brought within the ambit of Purchase Tax. As my hon. Friend pointed out, this affects not merely things within the D scheme, but also goods of the same type below the D level. That means that a large number of traders previously dealing in tax-free goods, who did not require registration, have found these same goods are subject to tax, and that, therefore, they must get registration, or be forced to abandon the trade which they have hitherto carried on. All that the Financial Secretary will say is that the Government, with the Customs and Excise, will examine these cases on their merits. It does not seem to me that when such a sweeping change as this has been made, which has put a large number of traders in a difficult position and has forced them to stop trading altogether, it is sufficient to say vaguely they will be examined on their merits.
A very large disturbance of these people's trade has been introduced, and, for all I know, the hon. Member for Edinburgh, South (Sir W. Darling), may have been put out of business altogether by the action of the Financial Secretary. The hon. Member has been looking very much concerned during this debate, and I think it is very noticeable that he has not sprung to the assistance or support of the Financial Secretary. For these reasons, which I express briefly because of the hour of the night, I do not feel able to advise my hon. Friends to be satisfied with the reply we have had from the Government.

Mrs. Castle: I must say that the reply of the Financial Secretary is totally unsatisfactory. I must protest against the most unfair insinuation he made against my constituent, when he suggested that there might be other reasons for the manufacturers not supplying.

Mr. Boyd-Carpenter: Would the hon. Lady allow me? I do not think what I said applies in the case to which she refers. I was dealing with the general issue. If she misunderstood me I am sorry. If any other hon. Member misunderstood me I am glad she mentioned it, but it may be that because of the hour of the night I did not express myself with clarity and lucidity. The reference I made was intended to be a general one and not specifically referring to the particular case.

Mrs. Castle: Of course I accept the assurance, but I must point out that the context in which the Financial Secretary made his remark was unfortunate, because it leads to that kind of deduction being drawn. The Financial Secretary has said that appeals may be made in hard cases, and has stated that one was taken from my constituency and was granted. Could I ask him what was the date, in order that I may be in a stronger position.
But, I cannot see that my constituent's case is met by his reply; and, whereas I agree that this Conservative Government

would be the last to pander to the Civil Service, because they are going to the other extreme and making the job of the Civil Service almost impossible by the arbitrary cuts which they are making, I do not see why my constituents should be forced into this inconvenience. I am not satisfied, and I must ask my hon. Friends to divide the Committee.

Question put, "That the Clause be read a Second time."

The Committee divided: Ayes, 102; Noes, 126.

Division No. 152.]
AYES
[2.6 a.m.


Acland, Sir Richard
Gibson, C. W.
Neal, Harold (Bolsover)


Albu, A. H.
Greenwood, Anthony (Rossendale)
Oswald, T.


Awbery, S. S.
Hail, Rt. Hon. Glenvil (Colne Valley)
Pargiter, G. A.


Bence, C. R.
Hamilton, W. W
Paton, J.


Benson, G.
Hannan, W.
Plummer, Sir Leslie


Blackburn, F.
Hargreaves, A.
Price, Joseph T. (Westhoughton)


Blenkinsop, A.
Hayman, F. H
Proctor, W. T.


Boardman, H.
Herbison, Miss M.
Reeves, J.


Bowles, F. G.
Hobson, C. R.
Rhodes, H.


Braddock, Mrs. Elizabeth
Holman, P
Roberts, Albert (Normanton)


Brockway, A. F.
Holmes, Horace (Hemsworth)
Royle, C.


Brook, Dryden (Halifax)
Hoy, J. H
Schofield, S. (Barnsley)


Burton, Miss F. E.
 Hudson, James (Ealing, N.)
Shackleton, E. A. A.


Butler, Herbert (Hackney, S.)
Hughes, Emrys (S. Ayrshire)
Shawcross, Rt. Hon. Sir Hartley


Callaghan, L. J.
Hughes, Hector (Aberdeen, N.)
Simmons, C. J (Brierley Hill)


Castle, Mrs. B. A
Hynd, J. B. (Attercliffe)
Snow, J. W.


Chetwynd, G. R
Jay, Rt. Hon. D. P. T.
Soskice, Rt. Hon. Sir Frank


Coldrick, W.
Jenkins, R. H. (Stechford)
Stewart, Michael (Fulham, E.)


Collick, P. H.
Jone, T. W. (Merioneth)
Stokes, Rt. Hon. R. R.


Cove, W. G.
 Keenan, W.
Sylvester, G. O.


Crosland, C. A. R.
King, Dr. H. M
Thomas, David (Aberdare)


Dalton, Rt. Hon. H.
Lever, Leslie (Ardwick)
Wallace, H. W.


Davies, A. Edward (Stoke, N.)
Lewis, Arthur
Wells, Percy (Faversham)


Davies, Ernest (Enfield, E.)
Lindgren, G. S.
Wells, William (Walsall)


Davies, Harold (Leek)
MacColl, J. E.
West, D. G.


Delargy, H. J.
McKay, John (Wallsend)
Whiteley, Rt. Hon W.


Driberg, T. E. N.
MacPherson, Malcolm (Stirling)
Wigg, George


Ede, Rt. Hon. J. C
Mayhew, C. P.
Willey, Octavius (Cleveland)


Edelman, M.
Mikardo, Ian
Williams, Ronald (Wigan)


Edwards, John (Brighouse)
Mitchison, G. R.
Williams, W. R. (Droylsden)


Fernyhough, E.
Morgan, Dr. H. B. W.
Williams, W. T. (Hammersmith, S.)


Field, W. J
Morley, R.
Wilson, Rt. Hon. Harold (Huyton)


Fienburgh, W.
Morris, Percy (Swansea, W.)



Freeman, John (Watford)
Moyle, A.
TELLERS FOR THE NOES:


Gaitskell, Rt. Hon. H. T. N.
Mulley, F. W.
Mr. Pearson and Mr. Wilkins.




NOES


Allan, R. A. (Paddington, S.)
Clarke, Col. Ralph (East Grinstead)
Graham, Sir Fergus


Alport, C. J. M.
Cole, Norman
Grimond, J.


Arbuthnot, John
Colegate, W. A.
Grimston, Hon, John (St. Albans)


Ashton, H. (Chelmsford)
Conant, Maj. R. J. E.
Grimston, Sir Robert (Westbury)


Assheton, Rt. Hon. R. (Blackburn, W.)
Crosthwaite-Eyre, Col. O. E.
Harrison, Col. J. H. (Eye)


Astor, Hon. W. W. (Bucks, Wycombe)
Crouch, R. F.
Harvey, Ian (Harrow, E.)


Baldwin, A. E.
Crowder, Petre (Ruislip—Northwood)
Heath, Edward


Banks, Col. C.
Darling, Sir William (Edinburgh, S.)
Higgs, J. M. C.


Barber, A. P. L.
Deedes, W. F.
Hill, Mrs. E. (Wythenshawe)


Beach, Maj. Hicks
Dodds-Parker, A. D.
Hirst, Geoffrey


Bennett, Dr. Reginald (Gosport)
Donaldson, Cmdr. C. E. McA.
Holland-Martin, C. J.


Bishop, F. P.
Doughty, C. J. A.
Hornsby-Smith, Miss M. P.


Black, C. W.
Duthie, W. S.
Horobin, I. M.


Boyd-Carpenter, J. A.
Fell, A.
Howard, Gerald (Cambridgeshire)


Boyle, Sir Edward
Finlay, Graeme
Howard, Greville (St. Ives)


Bromley-Davenport, Lt.-Col. W. H.
Fleetwood-Hesketh, R. F.
Jenkins, FL C. D. (Dulwich)


Buchan-Hepburn, Rt. Hon. P. G. T.
Fletcher-Cooke, C.
Johnson, Eric (Blackley)


Bullard, D. G.
Fraser, Sir Ian (Morecambe &amp; Lansdale)
Jones, A. (Hall Green)


Butcher, H. W.
Gage, C. H.
Kaberry, D.


Butler, Rt. Hon. R. A. (Saffron Walden)
Galbraith, Cmdr T. D. (Pollok)
Lambton, Viscount


Carr, Robert (Mitcham)
Galbraith, T. G. D. (Hillhead)
Lancaster, Col. C G.


Cary, Sir Robert
Godber, J. B.
Langford-Holt, J. A.


Channon, H.
Gomme-Duncan, Col. A.
Legge-Bourke, Maj. E. A. H.




Legh, P. R. (Petersfield)
Odey, G. W.
Stevens, G. P.


Linstead, H. N.
Ormsby-Gore, Hon. W. H.
Strauss, Henry (Norwich, S.)


Macdonald, Sir Peter (I. of Wight)
Orr-Ewing, Charles Ian (Hendon, N.)
Sutcliffe, H.


Mackeson, Brig. H. R.
Partridge, E.
Thomas, P. J. M. (Conway)


McKie, J. H. (Galloway)
Powell, J. Enoch
Thompson, Lt.-Cdr R. (Croydon, W.)


Macleod, Rt. Hon. Iain (Enfield, W.)
Price, Henry (Lewisham, W.)
Thorneycroft, Rt. Hn Peter (Monmouth)


Macpherson, Maj. Niall (Dumfries)
Profumo, J. D.
Tilney, John


Maitland, Patrick (Lanark)
Raikes, H. V
Vosper, D. F.


Manningham-Buller, Sir R. E.
Redmayne, M.
Wakefield, Edward (Derbyshire, W.)


Maude, Angus
Remnant, Hon. P
Ward, Miss I (Tynemouth)


Maudling, R.
Renton, D. L. M.
Waterhouse, Capt. Rt. Hon C


Maydon, Lt.-Cmdr. S. L C
Robinson, Roland (Blackpool, S.)
Wellwood, W.


Mellor, Sir John
Rodgers, John (Sevenoaks)
White, Baker (Canterbury)


Molson, A. H. E.
Roper, Sir Harold
Williams, Gerald (Tonbridge)


Nabarro, G. D. N
Russell, R. S.
Williams, R. Dudley (Exeter)


Nicholson, Godfrey (Farnham)
Ryder, Capt. R. E. D.
Wills, G.


Nicolson, Nigel (Bournemouth, E.)
Salter, Rt. Hon. Sir Arthur
Wilson, Geoffrey (Truro)


Nield, Basil (Chester)
Schofield, Lt.-Col. W. (Rochdale)



Noble, Comdr. A. H. P.
Scott, R. Donald
TELLERS FOR THE NOES:


Oakshott, H. D.
Smithers, Peter (Winchester)
Mr. Drewe and Mr. Studholme.

New Clause.—(ENTERTAINMENT ALLOWANCE AND EXPENSES.)

(1) In this section the expression "entertainment allowance" means a sum, being a sum in excess of one hundred pounds, which a person claims in computing his total income, profits, gains or losses in respect of any year of assessment for the purpose of income tax, profits tax or the excess profits levy, to be entitled to deduct in respect of the expense of providing entertainment for himself or for any other person, and the expression "expenses" means expenses incurred by a body corporate within the meaning of section thirty-eight or thirty-nine of the Finance Act, 1948.

(2) If the entertainment allowance or expenses of any person in any year of assessment, or his entertainment allowance together with his expenses in that year exceed one per cent. of his income, profits or gains for that year computed without deduction of his entertainment allowance and expenses, the Commissioners of Inland Revenue may, within a period not exceeding eighteen months from the expiry of that year of assessment, serve a notice in writing on that person, calling upon him to comply with all or any of the following requirements, namely:—

(a) to produce a fully detailed and itemised account showing how that person' s entertainment allowance and expenses or either of them is made up, and how and in what circumstances each item of expenditure contained in such entertainment allowance and expenses was incurred or is alleged by that person to have been incurred;
(b) to produce together with such account all documents and books relevant thereto and necessary to substantiate and verify the accuracy of such account;
(c) to furnish an affidavit sworn by that person, or in the case of a body corporate by the proper officer of that body corporate, stating that such account is to the best of the knowledge, information and belief of the deponent to such affidavit complete and accurate in all respects, and that the documents and books produced together with such account are complete and genuine and comprise all documents and books relevant to such account which are in the possession or control of that person.

(3) The aforesaid notice shall specify the time (not being less than three months from

the date of service of such notice) and the place at which such account, documents, books, or affidavit, as the case may be, are to be produced or furnished, and shall specify an officer of the department of the Inland Revenue to whom they are to be produced and furnished as aforesaid.

(4) If the Commissioners of Inland Revenue are not satisfied that full compliance has been made by a person upon whom such a notice has been served with the requirements contained in such notice, they may by a further notice in writing served on that person require him, or in the case of a body corporate, the proper officer of that body corporate, to attend at a time not less than ten days after service of such notice, to be examined orally upon such account, documents, books and affidavit aforesaid by such officer of the department of Inland Revenue as the Commissioners of Inland Revenue may in the said notice specify, and such examination shall be on oath which it shall be competent for the officer so specified in the said notice to administer.

(5) If a person upon whom such a notice as is referred to in subsection (2) or subsection (4) of this section is served fails without reasonable cause to comply in all respects with the requirements of any such notice, that person shall be guilty of an offence and shall be liable on conviction on summary indictment to imprisonment for a term not exceeding three months and to a fine not exceeding one thousand pounds, and if that person shall be a body corporate, that body corporate shall be liable to a fine not exceeding ten thousand pounds, and the directors and secretary of that body corporate shall likewise on such failure as aforesaid be guilty of an offence and liable on summary conviction therefor to imprisonment for a period not exceeding three months and to a fine not exceeding one thousand pounds in the case of each such director and the secretary.— [Mr. Albu.]

Brought up, and read the First time.

2.15 a.m.

Mr. Albu: I beg to move, "That the Clause be read a Second time."
The purpose of the Clause is to tighten up the present rules relating to expenses and entertainment allowances for directors and senior officials in companies. In


moving the Clause my hon. Friends and I are only trying to carry on the work which was done by the Labour Government, which, on a series of occasions, introduced provisions into Finance Acts with the intention of preventing evasion of tax by this method.
In particular, the Finance Act, 1948, in Sections 38 and 39, introduced measures to stop the practice of free expense and entertainment allowances unless they were wholly, exclusively and necessarily expended in carrying out the duties involved. In this way the Sections were for Schedule E purposes much narrower than those which existed for Schedule D, which did not include the word "necessarily." Those Sections are now Sections 160 and 161 of the consolidated Income Tax Act, 1952. The new Clause would give the Commissioners certain powers, if expenses or entertainment allowances exceeded 1 per cent. of income or profits, to demand detailed and itemised accounts, and also new powers in relation to these matters to examine books and documents.
It is not necessary to elaborate, certainly to anybody who lives in London, the necessity for some further measures. Although the purposes for which we introduced the Sections in 1948 were clear, most people would admit that they have by no means succeeded in their object, and it looks as if further powers are needed if they are to be seriously carried out. In spite of the changes introduced then, there is no doubt that very great abuses of the system of expense and entertainment allowances still occur, both for personal expenses, entertaining in restaurants and so on, and also in the provision of flats and suites in hotels and so on, for a purpose ostensibly connected with business but frequently apparently as a means of luxurious tax evasion. [Laughter.]
It is easy for hon. Members opposite to laugh at this, but they must remember the conditions under which they are introducing the Finance Bill. We must not forget, for instance, that on several occasions during the Committee stage, in making some concession or in dealing with some criticism, the Chancellor has said, "I hope this will be heard by the members of the Trades Union Congress." It is clear that somehow he believes that

some of the things that he has done in the Finance Bill will assist the leaders of the trade unions in the policy of wage restraint. It has already been shown that he is very wrong, but there is no reason why he should go further wrong. If he accepted the Clause he might go a long way towards making the trade union leaders and, more particularly, their members believe in the sincerity of his intentions,
Figures have frequently been given in recent years of the effects of redistributive taxation and full employment and so on in distributing in a more equitable way the national income and narrowing the gap between the higher and lower incomes. These figures are, on the whole, for what they purport to represent, reasonably fair and accurate, but I cannot help feeling—and I am sure my hon. Friends will agree with me—that the true effect of redistribution of income in the last three years has been greatly distorted by two things; first the expenditure of capital, and secondly the increasing use of expense and entertainment allowances. The figures take no account of this. The true relation of consumption as between the different classes of the community can only be measured if these things are taken into account.
I am not going to quote examples, but hardly an hon. Member will not have heard of cases of the type I have described. In fact, it would not be possible for a large number of the luxury restaurants and luxury hotels to exist at all in this country if it were not for the large expense allowances received by hotels, and directors and other senior officials of corporate bodies. [Interruption.] The hon. Member for Kidderminster (Mr. Nabarro) is, no doubt, well informed on these matters.

Mr. Nabarro: Does the hon. Gentleman include in his definition of "corporate body" the nationalised industries and the trade unions?

Mr. Albu: Of course I am including all bodies. The amount received in expense allowance by directors of nationalised industries are published and known, and are relatively small. There is no question whatever but that they are a minute fraction of the amount of expenses in many cases. I do not wish to elaborate the point, but this is a point


upon which—as the right hon. Gentleman can hear—there is a very strong feeling on this side of the Committee, and amongst those of us who represent the mass of the people of this country. I believe myself, quite seriously, and quite apart from the sort of joke hon. Members make from time to time, that there is something wrong in the present circumstances about the sort of sumptuary spending we have seen in recent years, which is absolutely out of keeping with the times in which we are living.
I sincerely hope that the Financial Secretary will be able to accept this new Clause, or at any rate a similar one, as a contribution towards the revenue by tightening up tax evasion. I believe he, as well as we on this side of the Committee, is in favour of that. This particular type of evasion is particularly unfair to those who live on salaries and wages, and it seriously opens the door to corruption. I hope that when the Financial Secretary speaks we shall not hear the usual negative that we have come to expect from the Treasury Bench —although I must say the hon. Gentleman has been reasonably forthcoming on occasions—but that he will realise that it is in his interest and that of the Revenue, and that he will give it his hearty support.

Mr. Snow: I hope the Government are not going to treat this matter with levity. Although the hour is late, this is a matter of supreme importance to hon. Members on this side of the Committee. I do not suppose there is a member of my party who has not been confronted with the following situation when we have attempted to demonstrate to our constituents by means of the annual return of the National Income and Expenditure the gradual smoothing out of the income levels in the country. Our constituents have replied that it is all very well according to the White Papers, but what they see going on in the shops and hotels disproves it.
I remember in 1949 the late Sir Stafford Cripps in his Budget coming to the conclusion that the top limit had been reached in the taxation of the upper income groups. I remember at that time thinking that I supposed he knew what he was talking about, but it did not seem right to me. Subsequently I have come

to the conclusion that he was right, on the assumption that there is no substantial tax evasion, ut the fact is, as the Parliamentary Secretary to the Ministry of Civil Aviation agreed on an earlier Clause, that there is serious evasion. The question is whether any legislation drafted to cope with it would be enforceable. I am the first to admit that the yardstick by which we should judge legislation is very largely that of enforceability. A brilliant British comedian whose professorial status has beer legitimised by a university has said that a respectable businessman is one who succeeds in living on the expenses he can get through the Inland Revenue. That is typical of the situation as it exists today.
There are three ways in which this type of expenditure is possible. First, by drawing on capital; and I am bound to say in parenthesis. watching the stock market ever since the Government came into office, that one can only conclude that a large section of people prefer to lose money under a Tory Government than lose money under a Labour Government. Then one can get this high and extravagant expenditure by means of capital expenditure. But by far the most likely source derives from the form of evasion we are discussing. On 29th April I put a question to the Chancellor of the Exchequer which read as follows:
Whether his regulations provide for companies operating in the Metropolitan area to maintain living accommodation for the companies' directors or staff without the said Accommodation being a personal Income Tax charge on the occupants…
The right hon. Gentleman replied:
The cost of maintaining such living accommodation would be deductable in computing the company's profits for Income Tax purposes if it was incurred wholly and exclusively for the purposes of the company's trade." —[OFFICIAL REPORT, 29th April, 1952; Vol. 499, c. 68.]
Is it possible to judge accurately whether accommodation is used "wholly or exclusively" for the company's trade? I was coming down in the train from my constituency some time ago and I got talking to an opulent gentleman who told me he lived in an exclusive hotel in the West End during the week. I said "That must be extremely expensive, if comfortable." He replied that his real home was in Sussex, but that if his company wanted him to work in London they


must pay for an apartment in London. I do not remember that sort of thing being permitted in business in London before the war. If one had a job in London one was expected to live reasonably close to it.
This racket has developed of charging the public—because that is what it amounts to—for a second accommodation, and it should be stopped. I have studied Section 161 of the Income Tax Act, 1952 as closely as I can. Incidentally, I challenge anyone to understand it fully for it is most complex, and it seems to me that there is a loophole here for directors to have this second home charged to the company, the company not paying tax, and the resulting inflation being in fact a charge on the public as a whole.

2.30 a.m.

Mr. G. Williams: Is the hon. Gentleman arguing that if a Member of Parliament has to live in London in order to carry on his business he is not entitled to reclaim Income Tax on that account?

Mr. Snow: That is a facile argument. I should not have thought that it was a serious argument which ought to be put forward. This is a serious matter. We have responsibilities in our constituencies which may be anywhere in the country. I am talking specifically about people whose businesses are in London and who have no reason at all for living elsewhere than in London to cope with their business.
The purpose of this new Clause is to provide the Commissioners of Inland Revenue formally with the facilities to obtain an accurate and honest statement of expenses—no more. With that information it would be possible to codify the expenses allowances that the Commissioners permit under existing law. I maintain that it is impossible for the tax inspectors to obtain the necessary information now, much less to produce a uniform code. I claim that at present the Commissioners are not in a position to practise equity in this matter.
Whatever hon. Members on the back benches opposite may feel about this matter, I warn them that they really must not put themselves in the position of being the protagonists of the petty racketeer in business. That is the sort

of impression they will give if they resist this new Clause. We must put a stop to this flagrant evasion of taxation. We must make people conform to a reasonable standard of behaviour.

Colonel L. E. Crosthwaite-Eyre: We have heard the most astonishing mis-statement of fact which has been heard in this Committee for a long time. The Treasury has complete power at the moment to make investigation into any expenses account of any person which they may feel is unfair or unrelated to the expenses which should be incurred in his or her normal task. This Clause, if it means anything at all, is a deliberate attempt by hon. Members opposite once again to promote prejudice against directors. It comes ill from them. They are the people who are trying to say that expenses are bad. Did they do that when they were in office?

Mr. Albu: Yes.

Colonel Crosthwaite-Eyre: Did they? I ask them to consider the Acts of Parliament which they passed and the £10,000 of expenses which they gave to the nationalised boards. Did they think of that one?

Mr. Mulley: Can the hon. and gallant Gentleman give chapter and verse for his allegation?

Colonel Crosthwaite-Eyre: The expenses given to the National Coal Board.

Mr. Mulley: There is nothing in the Act.

Colonel Crosthwaite-Eyre: There is. Perhaps the hon. Gentleman will think again before he challenges me. There were £10,000 given at the discretion of the chairman of the National Coal Board to the members.

Mr. Mulley: How many?

Colonel Crosthwaite-Eyre: What has that to do with it? Here the Clause says that we cannot have more than 1 per cent. or alternatively £100. That is what is the test for a director, and yet the chairman of the National Coal Board is given £10,000 without anything at all—

Mr. Mitchison: On a point of order. The hon. and gallant Gentleman has just made a statement which seemed to me to have nothing whatever to do with


the subject matter of this new Clause. May I respectfully call your attention, Sir Charles, to the fact that the object of this Clause is to provide facilities for inquiries into entertainment allowance and expenses. I submit that we are not concerned in the Clause with the amount of the entertainment allowances and expenses. What we are concerned with is facilities for inquiring into them.

The Chairman: I was listening very carefully to what the hon. and gallant Member was saying. He was giving reasons for dealing with this matter of expenses and I thought that what he was saying was quite in order.

Colonel Crosthwaite-Eyre: I do not want to pursue the point, but I think that the humbug of Members opposite ought to be exposed. They try to attack something which, they think, will produce a little benefit, whilst they themselves have for five years done the very thing by promoting expenses to the people whom they themselves favour. Now, they try to have a come-back on a technical point against people against whom, they think, they can in turn secure political prejudice.

Mr. James Callaghan: Mr. James Callaghan (Cardiff, South-East)rose—

Colonel Crosthwaite-Eyre: No, I will not give way. I want to finish what I am saying. The Inland Revenue at present have complete powers to investigate any particular expense account that they do not like.

Sir F Soskice: Sir F Soskice rose—

Coloncl Crosthwaite-Eyre: May I finish?

Hon. Members: Give way.

Colonel Crosthwaite-Eyre: The Clause adds absolutely nothing to the powers that the Inland Revenue have. It has been put on the Order Paper merely to try to create prejudice—

Mr. Callaghan: Mr. Callaghan rose—

Colonel Crosthwaite-Eyre: Let me finish my sentence. I will give way to the hon. Member. I have debated with him before and I am not frightened of him.

Mr. Callaghan: Is it quite impossible for the hon. and gallant Member to understand the simple point that no one is objecting to the payment of expenses or

to the claiming of expenses properly incurred, whether by members of nationalised boards or private industry? What the Clause is aimed at, and what, clearly, the Inland Revenue are not able to do, is to check on expenses that are improperly claimed by directors of private companies who are using their business expenses to inflate their private standard of life.

Colonel Crosthwaite-Eyre: Let the hon. Member, who has had the advantage of being six years in Government, produce one case, or two cases, or even a category of cases, in which the Inland Revenue have not been capable of dealing with this. He knows there are not any. [HON. MEMBERS: "Oh."] Of course he does. That happens under the existing reguladons. [Laughter.] The hon. Member may laugh, but for six years his Government introduced Clause after Clause—I see the former Chancellor of the Exchequer sitting beside him. I should be horrified to believe that the right hon. Gentleman was of opinion that a great number of directors had got out of the net which he had woven to ensure that they did not incur any undue expenses. During the time of the last Government Clause after Clause was introduced to see that no undue expenses were incurred. This Clause is not to try and strengthen the revenue at all; it is to try and make prejudice against directors. That is its sole purpose.

Sir F. Soskice: The hon. and gallant Member has now said about three times that the Commissioners have already all the powers which are set out in this Clause. Will he be so good as to look at subsection (4) and then tell me in what section of the Income Tax code the powers there given are contained?

Colonel Crosthwaite-Eyre: I must admit that the right hon. and learned Gentleman has got me at a disadvantage.

Sir F. Soskice: Will the hon. and gallant Gentleman, then, withdraw what he said about this being a Clause that gives no further powers but simply is done for prejudice?

Colonel Crosthwaite-Eyre: I certainly will not withdraw. If the right hon. and learned Gentleman looks at subsection (4) he will see the whole thing is permissive. [Interruption.] I do not think that is fair.

Mr. Callaghan: No arguments and no manners.

Colonel Crosthwaite-Eyre: If the hon. Gentleman thinks that, it is a compliment to myself.

The Chairman: I do not think that we should shout across the Floor of the House at each other.

Mr. Callaghan: As you are making this implied rebuke, Sir Charles, may I ask you whether it is, in your view, consistent with normal practice in the House for an hon. Member to make an allegation that this Clause has been put down with a view to prejudicing a particular class of persons, and, when he is challenged on that by my right hon. and learned Friend, admits he has no evidence and, indeed, that he is at a disadvantage, and then to continue with his argument and refuse to withdraw his allegation?

The Chairman: That is not a point of order.

Mr. Callaghan: I did not make it as a point of order.

The Chairman: I do not think that we should start shouting things across the Floor of the House.

Mr. Callaghan: I fully accept that. I just want to say, with your permission, that in my view the hon. and gallant Gentleman has put himself right outside the court of the House and has no longer any right to be heard.

Colonel Crosthwaite-Eyre: The hon. Member is always most free of his allegations when he is less certain of his ground. I never pretended to be a legal expert and never have done. [Interruption.] Perhaps some hon. Members opposite would have the grace to look at the Order Paper. [Interruption.] I have it here. I shall not read the whole Clause. It is a purely permissive Clause that starts, "If the Commissioners." The former Attorney-General would not expect anybody except someone well versed in the law—[Interruption.] I am sorry—I am trying to be honest with the House.

Sir F. Soskice: Sir F. Soskice rose—

Colonel Crosthwaite-Eyre: May I finish? I want to answer this question. Some rather sharp remarks were made and I only wanted to say that here is

a very tricky legal question. I do not pretend to be able to answer immediately, but I do believe that it did not invalidate my case; and if I gave the impression that I thought my case had been invalidated by what the right hon. and learned Gentleman said, I wish to make it clear that I did not mean that at all. I simply meant I was not prepared to take on any small legal definition he might have in his mind at the time.

Sir F. Soskice: I am very much obliged to the hon. and gallant Gentleman. He brought this all on himself by making a statement that this Clause was simply put down for purposes of prejudice and contained no new powers. I then asked him to look at subsection (4) and tell me in what section of the Income Tax code the powers therein contained are conferred. He said that he could not refer me to any section and that the powers in subsection (4) are permissive. They are always permissive. The powers in Section 31 of the Income Tax Act, 1952, are permissive. The Commissioners are not bound to do these things. They have the right to do them if they think fit.

2.45 a.m.

Colonel Crosthwaite-Eyre: May I say again—[HON. MEMBERS: "Give it up."] Certainly not; there is nothing to give up here. I am the first to admit that the right hon. and learned Gentleman may be correct. [HON. MEMBERS: "He is correct."] Then he is correct—all right. It does not alter the main argument that this Clause was put down not with the object of strengthening the hand of the Revenue but purely to create prejudice. No hon. Member opposite said anything to show that this Clause will do anything to strengthen the powers of the Revenue, despite whatever may be the technical point as to their additional powers. That is an entirely different matter from strengthening their hands.
If any hon. Member opposite could show how this can strengthen the position vis-à-vis the Revenue they would have a case; but in all the speeches which I have heard—even that of the right hon. and learned Gentleman; and I would be the first to admit that a technical case had been made out—on the only issue which counts, which is how this is going to ensure that money is not taken away from the Revenue which should be in the pockets of the Revenue, they have said


nothing. I am only too ready to admit that I may have been wrong in saying that subsection (4) does not produce some technical power for the Revenue; but the great thing to consider is whether this really means that people who are trying to defraud the Revenue are more likely to be caught. If it does, well and good; but if it does not—and I suggest that it does not—this is merely a Clause put down to try to make political prejudice and not to serve the nation.

Mr. Mitehison: The kindest thing we can say about the speech which we have just heard is that it is better not to comment on it.
I should like to go back to the Clause which we are considering, just to see what it does seek to do. I do not pretend to have exhausted all the powers of the Treasury; but 1 think I have been fairly thoroughly through most of them, and I think I am right in saying that this Clause adds very definitely to their powers. Subject to correction, I am not certain that a fully itemised account could otherwise be required, but I am certain that the powers in subsection (4) are quite new.
I think that both sides of the Committee would agree that if expenses or entertainment allowances of this kind are abused there can be no doubt whatever that the fullest powers should be given, and if powers which have been thought full enough in the past prove not to be sufficient those powers ought to be extended. It is obvious that no one in this Committee will be able to give a large number of detailed instances, and even where they know of instances they are not likely to be able to give particular information about them, and may be in difficulty about giving information at all. That is one side of the case.
The other point is this: it is common knowledge now that expenses and entertainment allowances are a matter of abuse, and are known to be a matter of abuse, and beyond the existing abuse they are firmly known also to be a widespread source of avoidance of taxation. If we start with the belief itself I can imagine nothing more dangerous and damaging now than that the belief should be there, even if it were grossly exaggerated or unfounded.
I think that in a matter of this sort one can appeal to the commonsense and knowledge of the world of hon. Members

of this Committee. We do know perfectly well that not only does the belief exist, but that there is substantial foundation for it. What we do not know is the extent of the existing abuse, nor the extent of the avoidance. If that statement is right, and I have tried to put it as fairly and uncontroversially as I can, it does show the need for the extension of the present powers. Once we come to that we have to say what is needed by way of extension. In a matter of this sort I attach, and I suggest the Committee ought to attach, great importance to the possibilities of oral examination.

Mr. Nabarro: Would the hon. and learned Gentleman allow me to ask him, because he is well versed in these matters, as are other hon. Gentlemen, whether it is not a fact that at present under Sections 38 and 39 of the Finance Act, 1948, where any reasonable doubt exists about the validity of a director's expenses the inspector of taxes will assess the whole of the expenses to Schedule E, and the onus of proof for the validity of the expenses is on the director? If he is unable to prove it the situation is that he remains assessed to Schedule E tax and has to pay that tax.

Mr. Mitchison: I do not think that is a full statement about that. The hon. Gentleman is referring to what are now Sections 160 and 161 of the Income Tax Act, 1952. There are two bodies concerned. One is the company concerned, and the other the director, or any other person taking the benefit of these allowances. It is true that Section 161. which is, I think, what the hon. Gentleman has in mind, because it is the old Section 39 of the Finance Act, 1948, goes some way in that direction. I do not think the hon. Gentleman denied for a moment that that has been effective in stopping the abuse of these allowances and these expenses.
That is the point we are concerned about at the moment. If the hon. Gentleman, who, and I speak without any offence, has obvious knowledge of this matter is prepared to get up and say of his knowledge, and to the best of his belief, that there is no abuse of expenses and entertainment allowances, then, speaking for myself, I should attach great importance to that statement.
I very much doubt if the hon. Member, or any of his hon. Friends in the Committee, is prepared to get up and say that. It is such common knowledge that, in fact, there is abuse of the powers of inquiry and of the ability to throw back the charge on to someone else, and that the powers are insufficient. That is the point which we have in mind and I repeat it because I think it is necessary for the Committee to remember it, that we cannot know, in any detail, what we have to do. There is some abuse, and we know that the belief in the abuse goes beyond the abuse itself.
One has to consider the moral effect and when the Labour Government were in power they brought in the two sections of the Finance Act of 1948 which are now under review and which are being re-enacted in the 1952 Act. It was because of the existence of the abuse, and because of the public damage caused by the belief in it. After all, we have to remember that this does not apply to the wage-earner in the ordinary sense, who is being asked now, as he has been for years past, to put his back into it, to produce more, and all the rest of it; and at this moment he is being asked to do these things in the face of rising food prices, a rise in the cost of living generally, and with shortage of money, and with the fear of unemployment becoming more and more very real. As we all know, actual unemployment is affecting many of these people.
One has only to look around London and, to a lesser extent in other large cities, to know perfectly well that there are people who are not wage-earners in the ordinary sense, but who are managing companies or holding directorships, who are using these expense allowances to get a partial tax-free standard of living which they otherwise would not have. To that extent, they are putting on the backs of the ordinary man and woman a burden which ought not to be theirs.

Mr. Nicholson: It is the hon. and learned Member's job to prove that the powers are inadequate; not to prove that they are not used.

Mr. Mitchison: I do not want to repeat this again, but shortly, I would say, because I have been asked, that I invite any hon. Member of this Committee to

get up and say that there is no abuse of expenses and no abuse of entertainments allowance. If the hon. Member will get up and say that I will give way.

Mr. Nicholson: Are the powers inadequate, if properly administered?

Mr. Mitchison: The hon. Gentleman, if he will allow me, is a very honest man. I did not expect him to get up and say that there is no abuse. But, if there is some abuse, then the powers are insufficient, or they may be improperly administered.
3.0 a.m.
I do not make such a suggestion, especially as the Revenue authorities and the Treasury authorities are among the most competent of the public services: they have powers of this sort and they used them properly. But I put it to the hon. Member and to the Committee that if, in fact, there are abuses, then the obvious conclusion is that the powers of the Treasury to investigate and check them are insufficient. I think we can rely on the Revenue Department and the Treasury to use those powers fully and adequately.
The question is whether the powers are sufficient. If the abuse exists—and that, I understand, is admitted—then surely the conclusion is that the powers to check it are inadequate; and when the point is made that the powers should be enlarged, then the Committee should look at it most favourably.
If this abuse were remedied it would do much for the morale of ordinary men and women who are being called upon to increase production, and to do it on a standard of living that now tends to fall and at the risk of unemployment. Yet these people see others admitting this abuse and getting a tax-free standard of living to which they are not entitled, because Parliament declines to give the Revenue sufficient powers to enforce what we all agree should be the law.

Mr. Boyd-Carpenter: This has been a lively debate, but the new Clause raises a comparatively narrow point—as to whether or not the existing powers of the Inland Revenue to obtain information with respect to this particular type of allowance are or are not adequate.
In so far as it is the intention of the hon. Member for Edmonton (Mr. Albu)


in moving this Clause to prevent the evasion of tax by the submission of in- accurate or false claims, one naturally has a good deal of sympathy for it. No-body on either side wishes that people should evade taxes imposed by this House and it is perfectly right that we should try to see that the officers of the Government who have the difficult duty of administering these taxes should have adequate powers of doing their job.
But if one looks at the terms of the Clause one is the more impressed with the narrowness of the point raised. It does not purport, as I understand, to alter in any degree the substantive law as to what types of allowances are permissible for deduction for tax purposes at all. All it seeks to do is to give to the Inland Revenue, in respect of this alone, further inquisitorial powers. Two points, there-fore, arise for the Committee to consider: first, whether the existing powers of the Revenue are adequate or not so far as obtaining information is concerned; and, second, if they are adequate, whether this is the right way to reinforce them.
In order that the Committee may make up its mind on these issues, I think it would be desirable if I might be allowed to put to the Committee the existing position. Claims in respect of entertainment expenses, as indeed for other forms of claim for expenses against the profits of businesses are in the first place made to the local inspector of taxes and in the great majority of cases the tax-payers produce to the inspector such accounts or evidence as he asks for. In the vast majority of cases the matter is settled between the taxpayer and the inspector.
But if the inspector, who at this stage is on a purely voluntary basis with the taxpayer, is not satisfied that sufficient evidence has been produced to justify the claim to these expenses, he has the very powerful weapon available that he can simply disallow the claim. If he disallows the claim, the taxpayer has two alternative courses open. He can accept the disallowance or he can go on appeal either to the general or, in special cases, to the Special Commissioners.
If he elects to go on appeal to the Commissioners the onus is on him to establish his case and to make out the claim by means of adequate evidence.

It is for him to bring forward such evidence as he thinks will support his claim before the Commissioners, and the Commissioners can either allow or disallow his appeal.
At that hearing the Commissioners have power to receive evidence—it may be on oath—from either the appellant or his employees, and they can examine any other person they require, and in relation to cases concerned with business profits they can call upon the taxpayer, in their discretion, to produce accounts, etc., relating to the point at issue. I would stress that it is in the taxpayers' interests if he is pursuing an appeal to produce satisfactory evidence in support of his claim, since, if he does not do so, he incurs the risk of losing his appeal and, therefore, the whole object of his claim.
Clearly, these powers are substantial, but in addition in only a minority of cases, I am glad to say, that there are special powers. I hope we shall proceed on the basis, which I believe to be a fact, that the overwhelming majority of taxpayers are honest men and that the desire to defraud the Revenue, though it exists no doubt in the case of a small minority, is probably smaller in this country than in any other country in the world.
In the special cases which arise there are in reserve the special powers, to which reference has already been made in the debate, in the hands of the Board of Inland Revenue under Section 31 of the Income Tax Act, 1952. In substance these powers extend to the requiring of the production for inspection of business accounts and documents about trading transactions, and, finally, there is the reserve power that false or fraudulent statements may receive the attentions of the criminal law.
In the light of this, it really seems that the powers of the Revenue to sift these claims are considerable, and it is, therefore, somewhat doubtful whether there is any need to superimpose upon them the further series of different powers suggested in the new Clause, relating, as I have said, to one class of claims. It seems to me that we have armed the Revenue with fairly considerable powers.
The hon. Member for Lichfield and Tamworth (Mr. Snow) referred to abuse—we can differ as to the degree but no hon. Member will dispute that there is


some abuse—and said that something must be done about it. That is a very facile line of argument because it begs the whole question whether this is the right "something."
I think I have put to the Committee, I hope adequately, my view that under the head of information relating to this type of allowance the powers vested in the Revenue are already very considerable and that it really 'does not seem necessary to superimpose these new powers upon them. The new powers rather cut across the general powers of the Revenue and, from an administrative point of view, it would be very inconvenient to invest them with certain powers under one head while, presumably, the existing powers would continue over the rest of the field and, contemporaneously, the biggest part of the field.
The proposals themselves in the Clause would be very severe. The production of itemized lists detailed within 18 months is a fairly heavy duty to impose upon people. Frankly, I would not hesitate to impose it if a case could be made out for it being really helpfully necessary. But no one wishes to impose upon a class of taxpayer, the majority of whom, Mr. Thomas, are as respectable as you or I—I will put it higher; as respectable as you, Mr. Thomas,—heavy duties unless it can be shown that the doing of that will remedy a substantial evil.
I will suggest again, in view of some of the speeches that have been made, that we are not at this stage at any rate discussing the general question of taxable allowances. They are a matter, of course, upon which it is very easy to arouse feeling, as we have seen on both sides of the Committee, and it is understandable that that should be so. I make no complaint.

Mr. Mulley: The hon. Gentleman 'certainly met the difficulty in which an hon. Friend of his was placed with regard to a Clause concerning Estate Duty. I think my hon. Friends wish to raise the general question of expense allowances, but we are in the same difficulty as his hon. Friend in framing a new Clause I which would be within the rules of order. Since the hon. Gentleman conceded that point to his hon. Friend, he should not take such a narrow view in this case.

Mr. Boyd-Carpenter: It is not for me to say what points can be raised in this debate. That is your duty, Mr. Thomas. My duty is to deal with the specific affairs hon. Members have put on the paper and which, it appears, they seek to insert into the Finance Bill. Because, if they desire to press this new Clause they are seeking ultimately to include the Clause in the Bill and effect an alteration in the law of this country. Therefore, I do not think it is my duty now to go into the whole general question as to whether allowances should be granted, for what purposes, to whom and in what circumstances. These are interesting questions but I do not think they are directly dependent upon this Clause.
I certainly did not understand from the hon. Member for Edmonton (Mr. Albu) that the Clause was intended— as the hon. Member for Sheffield, Park (Mr. Mulley) now seems to indicate simply as a peg upon which to hang a general discussion on allowances. The hon. Member for Edmonton moved it as a serious contribution to the law on that subject. It is certainly upon that basis that he would wish it to be considered.

Mr. Mitchison: Would the hon. Gentleman answer one question? The existence or non-existence of abuse of the allowance is very serious because if there is no abuse, then clearly the existing powers are sufficient. If, on the contrary, there is abuse, surely the hon. Gentleman will agree that that is a very cogent argument that the existing powers are not sufficient. Perhaps he will let us have his view of the extent to which abuse exists at the moment—if, in fact, there is any?

3.15 a.m.

Mr. Boyd-Carpenter: I have already made a comment on that, as the hon. and learned Gentleman will no doubt recall, but if I may follow up what he has said it is really no conclusive argument for these proposals even to say that the existing powers are in general inadequate. My own view is that they are adequate, but even if the hon. and learned Gentleman is right and I am wrong, it still does not follow logically that this curiously narrow point raised in this Clause is the right way of dealing with the matter. I am sure that he will appreciate that consideration also.
Our view is the one I expressed earlier. I do not think that these powers are


needed or will help. It is, of course, the duty of this Government, as it is of every Government, to ensure that the taxation imposed by Parliament, as, indeed, the laws passed by Parliament, are carried out. We shall, of course, watch the operation of this very difficult branch of the law, and if it does appear to us that we could usefully be armed with further powers we should not hesitate to come to Parliament and ask for them.
We shall certainly watch the matter because we have made it clear for every reason, fiscally and psychologically, we have no wish for legislation made by Parliament to be avoided. But in view of that attitude I have to say that we do not, after consideration, think that these particular powers will help us, and having come to that conclusion we are driven inescapably to the further conclusion that if this would not help us it would be wrong to ask Parliament to give us these powers. For those reasons we must oppose the new Clause.

Sir F. Soskice: We have listened to a very courteous and painstaking reply, and I am sure that we are all grateful to the Financial Secretary.
On the narrow front, he admitted, as the main plank of his argument—I start from the assumption, which anyone who has considered the subject will certainly make—that although it is the case that the vast majority of taxpayers do their level best to pay their proper due there is an unscrupulous minority which preys upon them, and abuses the facilities for avoiding tax obligation. The field in which the abuse goes on is in the entertainment expenses and the expenses falling within the purview of Section 160, which takes the place in the new Income Tax Act of Sections 138 and 139 of the 1948 Act which the late Government introduced.
I believe, and I feel sure all Members will agree, that if we put party prejudice aside, as I hope we shall in a matter of this sort, I am right in saying that there is considerable abuse by an unscrupulous minority in these two fields. On that assumption I shall try to answer the purely legal aspects of the Financial Secretary's argument.

Sir Ian Fraser: Why must we assume that in this particular field, to the exclusion of all

others, there is a group of people who act deceitfully or particularly knavishly against the Revenue? In other fields of taxation there will be some who seek to evade, but probably the great majority do not do so. Why must it be assumed that in this particular field there is a particular class who must be dealt with in this particular way?

Sir F. Soskice: I certainly do not say that evasion does not also take place in other fields of the tax system. I was saying that, especially in this field, everybody who looks at current events knows that evasion in particular takes place. I think that everybody will agree that that is so.
I pass from that to the purely legal aspect on which I should like to answer what the Financial Secretary has said. He made two comments which, I think, were wholly inconsistent. First, he said that the powers already vested in the authorities were far-reaching and that it was questionable whether anything further was necessary and, indeed, whether the new Clause went much beyond the powers already possessed. Then, rather shifting his ground, he went on to say that this was a terribly severe Clause and that we ought to hesitate before we vested the powers contained in it in the authorities. Those two positions are difficult to reconcile.
I adopt the medium course. I agree that Section 31 of the Income Tax Act, 1952, gives drastic powers. Equally, I entirely agree that it is always open to the inspector to over-assess a person so as to disallow his expenses. Then the necessity is put upon the taxpayer of trying to establish in the affirmative, before the General or Special Commissioners, that he is entitled to allowances that he seeks.
I agree with the Financial Secretary about both those considerations. But this new Clause does something entirely different from that. It goes beyond that. It does not go beyond it to an extent which I would suggest to the Committee is at all excessive, but it goes beyond it and gives powers which are different in kind. First, it is all very well to say that the inspector can wait till he gets before the appeal tribunal of the General or Special Commissioners and then cross-examine the taxpayer.
That is a late stage in the proceedings. It is not always easy when one gets


before the final tribunal of fact, because that is what it is, to make sure that one will have the material to hand to demonstrate that a claim which is put forward is falsely founded. The dice, as I think the inspectors will testify themselves, is often heavily loaded against the person who is trying to displace a claim put forward by a taxpayer who asserts, without very much detail, that he is, in fact, entitled to the claim which he puts forward.
Sometimes one can break it down. Often the material is not to hand to enable one to do so. What this Clause does is to give the inspector an opportunity of furnishing himself with that material before he comes before the appeal tribunal. He then comes with a fully documented brief and with the matter which he can put to the taxpayer when he is in the witness box. He is given that opportunity by this Clause.
The Financial Secretary may say, "Yes, but he has enough authority in that respect under Section 31, because that Section enables the Commissioners of Inland Revenue to require the production of accounts." But if the hon. Gentleman will compare what Section 31 provides with what the new Clause provides—both of them dealing with the pre-appeal position and designed to furnish the inspector with the material upon which to cross-examine before the tribunal—he will find that the new Clause gives new useful powers to the inspector.
I will enumerate some of them. Under Section 31 he can ask for accounts relating to the business. Under the new Clause not only can he do that, but he can require a statement as to how and in what circumstances each and every item of this expenditure claimed is said to have been incurred. Those two are very different. One may have an account which may contain a general unitemised statement of certain categories of expenditure. Here, one is given the opportunity to see that it is itemised. That is one difference.
The Clause also requires that the taxpayer shall supply an affidavit stating that the return he has made in relation to expenses is complete, and that he has disclosed all the documents in his power and control. If he swears an affidavit and is found to be wrong he is guilty

of a criminal offence: he is guilty of perjury.
Under Section 31 there is no power. The taxpayer is told to produce certain documents, and that is all. The new Clause goes still further in subsection (4). It goes a great deal further, and the Committee will have to consider whether, in their view, it goes too far. I suggest that it does not, but that this is what it does. It says that if the Commissioners are not satisfied that full compliance has been made with a request to produce accounts, and if they are not satisfied that the affidavit is true, they can require the taxpayer, if he is an individual, or, if the taxpayer is a company, its proper officer, to attend before an officer of the Board of Inland Revenue to be cross-examined on oath. All that can happen before the matter comes before the appeal tribunal.
Whether those powers are too extentive is a matter for consideration, but that they are effective, I suggest, is beyond all controversy. If the inspector is enabled, before the matter gets to the appeal tribunal, not only to be furnished with an affidavit and all documents have been produced, to be informed how each item of expenditure is said to have been incurred and in what circumstances, and if he is further enabled to cross-examine on oath the person who has furnished the particulars, and who is seeking the tax relief before he gets to the appeal tribunal, what is beyond controversy is that those powers are drastic and effective and that the inspector can put himself in a position to cross-examine with real effect if a taxpayer seeks to establish his claim before the Commissioners.
The question is whether those powers go too far. They do not, I suggest, because they are limited so as to be usable only in a particular category of cases: those in which the expenses plus the entertainment allowance, as defined in subsection (1), exceed 1 per cent. of the profits as computed without deduction of that entertainment allowance and expenses. Therefore, it is only in a limited category of cases that the powers are exercisable at all. In other words, it is only in a case where there is a fairly substantial claim in respect of these entertainment expenses and the other expenses.

Mr. Nabarro: Suppose, for example, that we are talking of a company director with an income of £1,000 a year. One per cent. of that—[HON. MEMBERS: "Only £1,000?"] That is not an unreasonable sum for a company director.
[An HON. MEMBER: "It is a very rare sum."] One per cent. amounts to a total expense of £10. The average company director would spend £10 on travelling in one month in the legitimate pursuit of his business, and that is an expense.

Sir F. Soskice: It has to be an expense, in the case of a director of that sort, which is devoted solely to entertainment.

Mr. Nabarro: The Clause does not say so.

Sir F. Soskice: Certainly it says that. It is entertainment allowance in the case of an individual, or expenses in the case of a body corporate, so that the director would have to have made a claim in excess of £10 purely for entertainment expenses out of his salary of £1,000.
The Committee may think that the 1 per cent. ought to be altered upwards or downwards—upwards, the hon. Member would no doubt have it; I am not speaking in any derogatory sense; he thinks that it is too low—but the principle of the Clause ought to be accepted: that we fix a limit beyond which one is, as it were, in the realm of suspicion. If he makes his claim beyond that limit, whatever it may be—we have fixed it at 1 per cent.—a person should consider himself liable to have these inquiries made of him and he should be under the obligation of answering questions which are put.
That is the basis on which the Clause is framed. If there is a real problem in the way of evasion, I urge that it is the duty of the Committee to furnish the Commissioners with adequate powers to deal with it. If the evasion is not dealt with, it simply means that the general body of taxpayers suffers quite unnecessarily under an injustice which should not be put upon them.
I quite agree that this is not the sole panacea for the problem. It is also most important that there should be adequate staff, adequately trained, and so on, and the process of recruiting and training staff has been going on for some time. But recruiting staff and training them is one

thing. Having been acquired, the staff should be armed with adequate powers to exercise in case of need. It is for these reasons that the Clause should be accepted by the Government. It is necessary and not excessive, and it does give powers not at present possessed.

3.30 a.m.

Sir I. Fraser: Could the right hon. and learned Gentleman say whether he would apply these tests to Members of Parliament's expenses?

Sir F. Soskice: Anybody is within the scope of the Clause, but, generally speaking, Members of Parliament do not incur more than £10 by way of purely entertainment expenses. If they do, the 1 per cent. can be adjusted upwards. We put in 1 per cent. because we thought that would probably be about the right figure in cases of bodies corporate.

Mr. Beresford Craddock: Why have hon. Members opposite discovered this discrepancy only now? Why did they not discover it during the last six years?

Sir F. Soskice: The last Government took a great many steps in this direction. They took steps to increase the available staff and proceeded with its recruiting. Then they went further and introduced Sections that have already been referred to in the Finance Act of 1948, which now find their place in the Code which began at Section 160 of the Income Tax Act, 1952. That has still not proved to be adequate, and that is why we now urge upon the Government to take this third step necessary to complete the process.

Mr. Boyd-Carpenter: No one would complain of either the tone or the substance of what the right hon. and learned Gentleman has said. But his legal argument, which is perfectly valid, I am sure —I would not venture to challenge him on that—does depend on two assumptions. It depends, first, on the assumption that it is in this particular field, the entertainments allowance field, that the major part, at least, of the trouble exists. It depends, secondly, on the assumption that the difficulty of dealing with it derives from lack of information. If those two assumptions of fact are made out, then the right hon. and learned Gentleman's argument has the greatest force.
But we do not accept these assumptions of fact, and, if one does not, then, naturally, one does not accept the logic of what the right hon. and learned Gentleman has said. We are not convinced, for the reasons I have given, that there is need for these additional powers. Once we recognise all this—and we have made detailed inquiries into this matter—then we arrive at the ordinary constitutional principle—which I hope hon. Members will accept—that a Government is not entitled either to ask for or to have forced upon it powers over the subject and over the citizen which it does not believe to be necessary. That is surely a sound principle, and it is really a matter on which we are entitled to press our views upon the Committee.
After all, we have the responsibility to Parliament and this Committee for the administration of the tax. If we fail to collect the tax the House will properly hold us responsible. Equally, we must abide by the principle that where the case for taking powers is not made out, those powers should not be conferred on the Executive, either at the Executive's request or, indeed, forced upon it. That sums up our attitude, and I hope that, whatever decision the Committee comes to on that issue, we may be able now to come to a decision.
The Committee has a good deal of work to do, although the dawn has not yet come through the windows. I hope the Committee might now take the view that the arguments have been stated and that we can now decide, if necessary by the traditional method which this Committee adopts.

Mr. Shackleton: The Financial Secretary has left the Committee in a very great difficulty. I think we have reached the stage when it might be said that the discussion is only just beginning, because we have now got to a point where the Government, having rejected the proposals for additional powers to enable them to deal with a problem which is now fairly admitted throughout the Committee to be a serious one, and while saying that they do not need these powers, have no alternative suggestion to make beyond the general observation that they will watch the situation.
The case which has been made out on the narrow issue—and which has

been explained so very forcibly and fully by my right hon. and learned Friend the Member for Neepsend (Sir F. Soskice) —does help to fill a gap in the system of tax collection by dealing with this particular problem: I think it is necessary to look at the mechanics of the system of dealing with expenses in a particular company. The normal procedure is for a member of the firm—a director or the chairman—to submit a form of expense account which, ultimately, finds its way to the secretary of the company, or somebody else, and in due course the director or chairman receives a cheque directly or through his bank.
In time, those expenses will find their way to the local tax authorities, who may then have to make a decision which to some extent might be called an intuitive decision. They will have to judge the general position and, in the light of their knowledge of what is customary with regard to entertainment expenses, to judge how far they regard those expenses as reasonable.
If it is apparent to them that the expenses have shot up very much, taking into account the type of business carried out by the firm, they may query some of those expenses but, broadly speaking, they will accept them on the basis of fairly slight evidence. Itemised accounts may be made available, but even though they may look impressive those accounts may not give the essential nature and purpose of the entertainment.
I think that we are in a very serious difficulty. All hon. Members will probably agree that at one time or another they have heard somebody inviting them or their friends to have lunch "on Mr. Butler" or, in the days of the previous Government, to lunch or dine "on Mr. Gaitskell."

The Temporary Chairman (Mr. George Thomas): Order. The hon. Gentleman must not name right hon. Members.

Mr. Shackleton: I think it is in order for me to quote statements uttered outside the Chamber. I am not referring directly to either right hon. Gentleman; I am merely quoting statements.
It has become part of business custom for people to lunch and dine together on the flimsiest of excuses, and they do it at the expense of the Chancellor and of


the country without feeling that it is wrong to do so. To some extent this is a moral problem. I am not one of those who believe that this new Clause will solve the problem, but I think that a clear case has been made out that it will go some way towards helping to solve it, and it is for that reason that we are urging the Government once again to consider the case which has been put forward.
Although the Financial Secretary tried to keep the debate on narrow lines, I think it is necessary to consider this problem in the general context. We hear demands for wage restraint. Could not we have an appeal for expenses restraint? Could not the issue be put fairly before the people who are using these expenses lightly—and probably without any idea that they are defrauding the country—because this is a practice that has grown up during the past few years? There are some who are undoubtedly aware of what they are doing. But this is a case where, at least, I think the Government ought to tell us what they are going to do to deal with this problem. If they cannot come forward with any better suggestion, and reject the proposal we have made from this side of the Committee without giving their own version or alternative plan, other than that they will watch the situation, I think they are failing most lamentably in their duty of serving the public interest.
I would only make one other small point. We have had the question of expenses of Members of Parliament raised during the discussions. One hon. Gentleman the hon. Member for Lonsdale and Morecambe (Sir Ian Fraser), who entered the Committee recently, and left it very quickly, raised a point without bothering to discover what we were discussing. It is important to realise that that is a different matter from the one we are discussing, and that it does not do to bring that matter into our discussions, especially where we are trying to deal with a different problem.
I would conclude by asking the Financial Secretary what steps he proposes to take as an alternative to the proposals which I think will help, when one examines the actual mechanics of the presentation of expense accounts, the Income Tax inspector who has to collect the tax to do his job more efficiently.

Mr. Mulley: I do not apologise for rising to speak on this Clause, which is important. If hon. Gentlemen opposite get a little agitated they should recollect that they have speech by speech, Amendment by Amendment and Clause by Clause occupied the Committee as much as this side, and should not come in with indignant looks such as the Patronage Secretary has when we are considering this important matter. I suggest that hon. Gentlemen opposite should contain themselves white we try to get a complete answer from the Financial Secretary. This is, in essence, the same point that was raised earlier about the powers of the Inland Revenue to produce books, or to ask for books and accounts to be produced by people when putting in their profits statements. The same argument was then brought forward that the existing powers were sufficient, and that is the argument we have heard again from the Financial Secretary.
My right hon. and learned Friend has dispelled any doubts the Committee may have had about additional powers the Clause might give to the Inland Revenue in this matter. There is a very substantial additional point. I hope that the Financial Secretary will concede the principle we are making, and that if he cannot accept the actual detailed formula of the Clause he will realise the difficulty in which the Opposition are in formulating new Clauses, because one has only to suggest in a remote manner that a new tax or incidence of tax may arise for an individual and that Clause is out of order.
It would be much easier for the Government to bring forward proposals on this subject than it is for the Opposition, and I hope he will concede the point and say that on the Report stage he will deal with entertainment and other allowances, which everyone has admitted, by not accepting the challenge of my hon. and learned Friend the Member for Kettering (Mr. Mitchison), are being abused. It is not so much a matter of tax evasion. It is in many cases a matter of tax avoidance. The expenses incurred are perfectly legal. There is no question of their being anything that the Inland Revenue can do about it. It is an extravagance permitted by the law as it stands.
All my hon. Friends want is the law to be altered to curb the extravagance.


Let me illustrate it by an example. I would refer to the expenses of an hon. Member, as such. If an hon. Member who has a business or directorship, or an income assessed under Schedule D brings an acquaintance to lunch in the House, then he can charge the whole cost against his assessment. But if an M.P. invites a constituent to a cup of tea—or a pot of tea it has to be now, following the decision of the Kitchen Committee—then that cannot be charged against a Member's income in any way whatever. There is no provision for entertainment expenses, of whatever percentage, against Schedule E assessment. Again, if an hon. Member with other source of income goes home by taxi-cab and claims that he needs to go home more quickly in order to arrive fresh for the next day's business, he can claim that against his assessment. But an hon. Member who has no such Schedule D assessment cannot thus claim, even though no alternative means of transport exists at this hour of the morning.
3.45 a.m.
The Schedule D requirement is merely that the expense was exclusively and wholly incurred for the purposes of the person's trade. It is the only requirement which has to be shown, and the Inland Revenue authorities have no power to say that it is extravagance. If a man spends £10 with the objective of earning LI, then that is a matter for the trader and not the Inland Revenue; no law states that one's calculations must be to profit and not to lose. It is perfectly in order if it is shown as coming within the wide definition of "for the purposes of trade." Nothing whatever can be done about it ranking as an expense.
But if one's assessment is on Schedule E. one has to show, in addition to incurring the expenses "wholly or exclusively" for one's occupation, that the expenses were necessarily incurred; and because an M.P. can turn away a constituent without a cup of tea, he can have no claim whatever to entertainment expenses. That is the difference between Schedules D and E.
A business man may ride in a large car, whereas his workman has no means of claiming the modest charges he incurs in his travelling to work. There must be a great abuse by way of this tax avoid-

ance. It is the means of people living far beyond what their taxed income could provide. I think it is true to say that there is a mere handful of people who are able to buy, from their taxed income, a Rolls Royce car; and yet Rolls Royce sell a considerable number of their cars in this country every year. They are, of course, bought by persons obtaining these allowances and the Inland Revenue authorities, with their present powers, cannot decide if it is necessary for a Rolls Royce to be bought or whether a more modest car would serve the purposes of the business.
How many business people found it "wholly or exclusively within their trade or profession" to be at Epsom today to see the Derby? I would say that the Chancellor paid for a large number in attendance although his public duties forbade his being there in person. And all this takes place at a time when we are asked to go back to our people and urge upon them a policy of wage restraint. The Financial Secretary of the Chancellor should consider the principle of what we want to do, even though he is not prepared to accept the actual detailed wording of the new Clause.

Sir R. Acland: I should like to explain to hon. Members opposite, and particularly to the hon. Member for Kidderminster (Mr. Nabarro), why we on this side feel that a matter of principle is involved in what has been described as a "rather narrow" issue.
The way we behave depends a little on what we think is likely to happen to us if we should be caught behaving wrongly. We would all concede that railway fares ought to be paid and probably a considerable number of us would, in fact, pay our fares even if there were no ticket-collectors. But for a great many people the actual presence of a ticket-collector at every barrier does just tip the balance between paying and not paying. If the situation was that there were there ticket collectors on approximately one in ten of the barriers and, if, on approaching the barrier—

The Temporary Chairman: Would the hon. Baronet tip the balance back to the new Clause?

Sir R. Acland: I was giving a simple illustration, Mr. Thomas, of how human


nature reacts to circumstances and that is precisely relevant to the powers which the Treasury have. If one barrier in ten was manned, and the only thing necessary to do was to approach a manned barrier to purchase a ticket, enormous numbers of people would not pay.
Is that not analagous to the present position? As I understand, suppose a director puts in a claim that his expenses have been £250. The only thing that can happen to him on that is that he is asked to give details in writing. He gives them and that is not very difficult. if the inspector is not satisfied with that, the return will come back to him, with the inspector's own idea of what the expenses should be—say, £100. If the director does not feel that he can prove that much more he will settle and lose nothing. Later, he might get the inspector to agree to £150 or £170. If he. thought he had an overwhelmingly strong case he could appeal and he could be cross-examined.
The thing which cannot happen to him under the present law is that he can never be cross-examined on oath on his first statement of his own expenses. He can put in that statement of expenses almost where he likes. If it goes through unchallenged, he has got away with it. If he is challenged, nothing unpleasant happens to him except that he has to accept the lower figures. The powers in the Clause would mean to every man putting in his expenses claim that he might not only be required to give details in writing but that he might be cross-examined orally and on oath on his own first statement of his expenses, and it would have the effect of very seriously moderating claims for expenses. For that reason I hope the Clause will go through.

Mr. Gaitskell: I am sorry that we have had to have this debate at such a late hour. The subject is an extremely important one; I think it is one of the most important of all the new Clauses. I certainly make no apology for delaying the Committee a little longer.
As has already been pointed out, during the rest of the Committee stage a great deal of time has been taken up by hon. Members opposite. They took a remarkable dislike to the Finance Bill, and, therefore, troubled the Chancellor a great deal. I am sorry that the Chan-

cellor has not been here most of the time. I realise that he is very busy and has to have some rest. I do not wish to suggest in any way that the manner and form displayed by the Financial Secretary was at all inadequate, but the subject is so important and the debate has been so interesting that I wish the Chancellor had been here to listen to it.
I do not think that anybody can dispute that the question of entertainment expenses and allowances is a very vital one and one with which public opinion is much concerned. There is a very widespread feeling that a great many people get away with far too much. The Financial Secretary intimated that in the view of the Government this is not one of the most important types of tax evasion. Strictly, in financial terms, that may be so, but from the point of view of the public attitude to taxation it is certainly among the most important sources of evasion precisely because it is an ostentatious type of evasion. That is why we have chosen the subject—not exclusively, because we had another Clause on evasion generally'—for particular mention now.
We should all agree that the present situation is not satisfactory. That indicates that any Government should strive to try to check the evasion which exists. Some hon. Members have asked why we did not do this when we were in power. We made a start with it. In 1948, Sir Stafford Cripps brought in some important improvements, and it was certainly my intention, had I had the opportunity, to carry that further. I was not able to do so last year, because we had a number of other important tax evasion matters with which to deal. The Committee will remember them very well because of the many nights—not just one night—we spent discussing them.
The question arises what we can do about it. Some of my hon. Friends have suggested that the whole principle of entertainment allowances is wrong and that they should not be permitted at all. I do not think that is practicable if only because the export trade would have to do a certain amount of entertainment. Others have suggested that a definite limit should be imposed on the amount that any company or individual may spend on entertainment. There would be the practical difficulties of deciding a


limit which would not be too high for some people and unfairly low for others. Incidentally, we could not have brought either of those two propositions into the Clause because they would have been out of order.
My right hon. and learned Friend the Member for Neepsend (Sir F. Soskice) explained, with his customary lucidity, the purpose of the Clause. I think he completely refuted the argument of the Financial Secretary that this would not help and that it would not make any difference. My right hon. and learned

Friend made it perfectly clear that it would make a substantial difference. It would provide the inspectors with valuable additional powers. We take the view that the issue is an important one, and something should be done about it. We are quite convinced that this new Clause does do something about it. On those grounds, I recommend strongly to my hon. Friends that we should now press the matter to a Division.

Question put, "That the Clause be read a Second time."

The Committee divided: Ayes, 99: Noes, 126.

Division No. 153]
AYES
[4.0 a.m.


Acland, Sir Richard
Gaitskell, Rt. Hon. H. T. N.
Moyle, A.


Albu, A. H.
Gibson, C. W.
Mulley, F. W.


Awbery, S. S
Greenwood, Anthony (Rossendale)
Neal, Harold (Bolsover)


Bence, C. R.
Hall, Rt. Hon. Glenvil (Colne Valley)
Oswald, T.


Benson, G.
Hamilton, W. W.
Pargiter, G. A.


Blackburn, F.
Hannan, W
Paton, J.


Blenkinsop, A.
Hargreaves, A.
Plummer, Sir Leslie


Boardman, H.
Hayman, F. H.
Price, Joseph T. (Westhoughton)


Bowles, F. G.
Herbison, Miss M.
Proctor, W. T.


Braddock, Mrs. Elizabeth
Hobson, C. R.
Reeves, J.


Brockway, A. F.
Holman, P.
Rhodes, H.


Brook, Dryden (Halifax)
Holmes, Horace (Hemsworth)
Roberts, Albert (Normanton)


Burton, Miss F. E.
Hoy, J. H.
Royle, C.


Butler, Herbert (Hackney, S.)
Hudson, James (Ealing, N.)
Schofield, S. (Barnsley)


Callaghan, L. J.
Hughes, Emrys (S. Ayrshire)
Shackleton, E. A. A.


Castle, Mrs B. A.
Hughes, Hector (Aberdeen, N.)
Simmons, C. J. (Brierley Hill)


Chetwynd, G. R 
Hynd, J. B. (Attercliffe)
Snow, J. W.


Coldrick, W.
Jay, Rt. Hon. D. P. T.
Soskice, Rt. Hon. Sir Frank


Collick, P. H.
Jenkins, R. H. (Stechford)
Stewart, Michael (Fulham, E.)


Cove, W. G.
Jones, T. W. (Merioneth)
Sylvester, G. O.


Crosland, C. A. R.
Keenan, W.
Thomas, David (Aberdare)


Dalton, Rt. Hon. H
King, Dr. H. M.
Wallace, H. W.


Davies, A. Edward (Stoke, N.)
Lever, Leslie (Ardwick)
Wells, Percy (Faversham)


Davies, Ernest (Enfield, E.)
Lewis, Arthur
Wells, William (Walsall)


Davies, Harold (Leek)
Lindgren, G. S
West, D. G.


Delargy, H. J
MacColl, J. E.
Whiteley, Rt. Hon. W.


Driberg, T. E. N
McKay, John (Wallsend)
Willey, Octavious (Cleveland)


Ede, Rt. Hon. J. C
MacPherson, Malcolm (Stirling)
Williams, Ronald (Wigan)


Edelman, M.
Mayhew, C. P.
Williams, W. R. (Droylsden)


Edwards, John (Brighouse)
Mikardo, Ian
Williams, W. T. (Hammersmith, S.)


Fernyhough, E.
Mitchison, G. R
Wilson, Rt. Hon. Harold (Huyton)


Field, W. J.
Morgan, Dr. H. B W.



Fienburgh, W.
Morley, R.
TELLERS FOR THE NOES:


Freeman, John (Watford)
Morris, Percy (Swansea, W.)
Mr. Pearson and Mr. Wilkins.




NOES


Allan, R. A (Paddington, S.)
Channon, H.
Galbraith, T. G. D (Hillhead)


Alport, C. J M.
Clarke, Col Ralph (East Grinstead)
Godber, J. B.


Arbuthnot, John
Cole, Norman
Gomme-Duncan, Col. A


Ashton, H. (Chelmsford)
Colegate, W. A.
Graham, Sir Fergus


Assheton, Rt. Hon. R. (Blackburn, W.)
Conant, Maj. R. J. E.
Grimond, J.


Astor, Hon. W. W (Bucks, Wycombe)
Crosthwaite-Eyre, Col. O. E.
Grimston, Hon. John (St. Albans)


Baldwin, A. E. 
Crouch, R. F.
Grimston, Sir Robert (Westbury)


Banks, Col. C. 
Crowder Petre (Ruislip—Northwood)
Harrison, Col. J. H. (Eye)


Barber, A. P. L. 
Darling, Sir William (Edinburgh, S.)
Harvey, Ian (Harrow, E.)


Beach, Maj. Hicks
Deedes, W. F.
Heath, Edward


Bennett, Dr. Reginald (Gosport) 
Dodds-Parker, A. D.
Higgs, J. M. C.


Bishop, F. P. 
Donaldson, Cmdr. C. E. McA
Hill, Mrs. E. (Wythenshawe)


Black, C. W. 
Doughty, C. J. A
Hirst, Geoffrey


Boyd-Carpenter, J. A. 
Drewe, C.
Holland-Martin, C. J.


Boyle, Sir Edward
Duthie, W. S.
Hornsby-Smith, Miss M. P 


Bromley-Davenport, Lt.-Col. W H
Fell, A.
Horobin, I. M.


Buchan-Hepburn, Rt. Hon. P. G. T
Finlay, Graeme
Howard, Gerald (Cambridgeshire)


Bullard, D. G. 
Fleetwood-Hesketh, R. F.
Howard, Greville (St. Ives)


Butcher, H. W. 
Fletcher-Cooke, C.
Jenkins, R. C. D (Dulwich)


Butler, Rt. Hon. R. A (Saffron Walden) 
Fraser, Sir Ian (Morecambe &amp; Lonsdale)
Johnson, Eric (Blackley)


Carr, Robert (Mitcham) 
Gage, C. H
Jones, A. (Hall Green)


Cary, Sir Robert
Galbraith, Cmdr. T. D. (Pollak)
Kaberry, D.




Lambton, Viscount
Noble, Cmdr. A. H. P
Stevens, G. P.


Lancaster, Col. C. G
Odey, G. W.
Strauss, Henry (Norwich, S.)


Langford-Holt, J. A. 
Ormsby-Gore, Hon. W. D.
Studholme, H. G.


Legge-Bourke, Maj. E. A. H
Orr-Ewing, Charles Ian (Hendon, N.)
Sutcliffe, H.


Legh, P. R. (Petersfield) 
Partridge, E.
Thomas, P. J. M. (Conway)


Linstead, H. N. 
Powell, J. Enoch
Thorneyoroft, Rt. Hn. Peter (Monmouth)


Macdonald, Sir Peter (I. of Wight) 
Price, Henry (Lewisham, W.)
Tilney, John


Mackeson, Brig. H. R. 
Profumo, J. D
Vosper, D. F.


McKie, J. H. (Galloway) 
Raikes, H. V
Wakefield, Edward (Derbyshire, W.)


MacLeod, Rt. Hon. Iain (Enfield, W.) 
Redmayne, M.
Ward, Miss I. (Tynemouth)


Macpherson, Maj. Niall (Dumfries) 
Remnant, Hon. P
Waterhouse, Capt. Rt. Hon. C


Maitland, Patrick (Lanark)
Renton, D. L. M.
Welfwood, W.


Manningham-Buller, Sir R. E
Robinson, Roland (Blackpool, S.)
White, Baker (Canterbury)


Maude, Angus
Rodgers, John (Sevenoaks)
Williams, Gerald (Tonbridge)


Maudling, R. 
Roper, Sir Harold
Williams, R. Dudley (Exeter)


Maydon, Lt.-Cmdr. S. L. C
Russell, R. S.
Wills, G.


Mellor, Sir John
Ryder, Capt. R. E. D.
Wilson, Geoffrey (Truro)


Molson, A. H. E. 
Salter, Rt. Hon. Sir Arthur



Nabarro, G. D. N. 
Schofield, Lt.-Col. W. (Rochdale)
TELLERS FOR THE NOES:


Nicolson, Godfrey (Farnham) 
Scott, R. Donald
Mr. Oakshott and


Nicolson, Nigel (Bournemouth, E.) 
Smithers, Peter (Winchester)
Mr. Richard Thompson.


Nield, Basil (Chester)

New Clause.—(AMENDMENT OF S. 33 OF FINANCE ACT, 1947.)

Section thirty-three of the Finance Act, 1947, shall have effect in relation to the profits tax for any chargeable accounting period ending after the year nineteen hundred and fifty-one with the substitution in subsection (1) thereof for the reference to two thousand pounds of a reference to five thousand pounds, and in subsections (2) and (3) thereof with the substitution for the references to two thousand and to twelve thousand pounds respectively of references to five thousand and twenty thousand pounds.—[Mr. Crosland.]

Brought up, and read the First time.

Mr. Crosland: I beg to move, "That the Clause be read a Second time."
I begin by expressing the hope that, although the hour is late, this Clause will engage the serious attention of the Committee, because I genuinely believe that it is of great importance. It may not be clear from the wording of the Clause precisely to what it refers. Perhaps I might start by giving a brief explanation of what it seeks to do.
Hon. Members will remember that under Section 33 of the Finance Act, 1947, the profits in any chargeable accounting period, including profits from franked investment income, up to £l;2,000 are completely exempt from Profits Tax. The 1947 Act also contains provision that between £2,000 and £12,000 there shall be a certain exemption from Profits Tax, the exemption being equal to one-fifth of the difference between the actual profits and £12,000. Under the 1947 Act, therefore, supposing a firm is making profits of £7,000, it can offset against Profits Tax one-fifth of the difference between £7,000 and £12,000, namely £1,000.
What this concession gave under Profits Tax was a gradual concession

which was at its highest peak when profits were at £2,000 a year, and which gradually tapered off as profits rose towards £12,000. Our proposal is that these figures should be amended. What we propose is that profits in any chargeable period which, including franked investment income, are less than £5,000, should be exempt from Profits Tax. We further propose that profits between £5,000 and £20,000 should be subject to the same concession as before, namely one-fifth of the difference between the actual profit and profits up to £20,000 should be exempt from Profits Tax.
In other words, a company making profits of £15,000 should be able to set off against Profits Tax one-fifth of the difference between £15,000 and £20,000, namely £1,000. The concession we seek to make amounts to a large and important concession for the smallest companies of all, companies whose profits are £5,000 or less, including franked investment income. It is then a diminishing concession for companies whose annual profits are £20,000 a year or more.
We think that there is a logical case for this concession. It is a case which we hope will appeal to the Chancellor, because, so far as the Excess Profits Levy is concerned, after originally setting the minimum at £2,000 the Chancellor subsequently tabled an Amendment which raised the minimum to £5,000. If he takes the view in the case of the Excess Profits Levy that £5,000 is a proper exemption figure, we hope that he may be willing to take the same view in the case of Profits Tax.
This concession to small businesses which we propose is in line with the attitude which we have taken on this side


of the Committee throughout the Committee stage of the Finance Bill. It is very much in line, for example, with the new Clause moved by my hon. Friend the Member for Edmonton (Mr. Albu) this afternoon to give initial allowance concessions to small businesses. That Clause was turned down by the Government with, to my mind, an insufficient explanation and justification. In general, it has been the case throughout our discussions that we have been faced with a Budget which penalises small companies. From this side of the Committee we have been inclined to give some aid to those who otherwise would be hard hit by these provisions.
Perhaps I might say in passing that this new Clause is not in contradiction to the Amendments which we moved on Clause 30 on the Profits Tax. They were Amendments which had regard to the amount which could be offset for directors' remuneration. Our concern is to aid small and growing businesses from the point of view of the ability to plough back their profits. That is the point we are concerned with—the factor of growth.
4.15 a.m.
The reason we now wish to raise the figure from £2,000 to £5,000 is that from the date when it was set at £2,000 there has been a very substantial fall in the value of money and, obviously, the figure of £2,000, as it originally was, is equal to a very much larger figure today. It is quite consistent with our general attitude that we on this side should wish to encourage these small and growing concerns. A lot of people pay lip service to the importance of small companies and growing companies, but very few people are willing to make serious actual concessions to them. It is particularly important now that we should encourage these companies.
We on this side want to encourage them for all manner of reasons. We certainly do not wish to see British industry dominated entirely by large, monopolistic concerns. It is important to encourage every possibility of competition against these large concerns on the part of small companies. [An HON. MEMBER: "Transport."] We believe that this is important. [Interruption.] If the hon. Member for Kidderminster (Mr. Nabarro) would stop

his argument across the Chamber and attend to my speech and the argument I am developing, he would find himself greatly in sympathy with what I am saying. He can give his views to the Committee afterwards. If he does not support the principle of the Clause, he is going against everything he has said throughout the entire Committee stage.
We wish to encourage these small firms because we do not approve of a concentration of economic power in the hands of the giant concerns, and also on general grounds of efficiency, because we are against the whole structure of industry stagnating. We are in favour the whole time of encouraging what the great economist Marshall, a figure whose books certainly will be read on the Front Bench opposite, and a great protagonist of the price mechanism and all the rest, called "the young trees of the forest coming up, taking the place of the old trees dying."
We are also on the side of the young companies for a very important reason, to which I do not think enough attention is devoted. That is, an argument in terms of invention, innovation, the discovery of new techniques and the like. It is sometimes suggested that all important innovations in the economic sphere are done in the research departments of the enormous firms. It is often suggested these days that we have got to rely for technical advance in industry on the discoveries and developments of the very large firms because only they can afford the necessary money for research, the requisite number of research chemists, and the like. This argument is a great deal over-stated, and frequently the important innovations do not come from the existing giant firms but from small, new firms which get an idea and develop it to the great benefit of the whole of industry.
It is for these general reasons that we wish to encourage the small firm. We on this side have a certain prejudice in favour of the small firm and the growing firm. We have no particular prejudice in favour of large monopolistic concerns. We have even nationalised one or two of them. Perhaps in future years we shall nationalise one or two more of them. I do not know what the policy of our party may be on that. It may be


that we will develop new forms of control over these large monopolistic concerns. We have no particular prejudice in their favour, but by contrast we certainly have a prejudice in favour of the small concerns which have the possibility of growth and development.
I think it is admitted verbally on both sides of the Committee, although nothing is done about it from the other side, that the curent trends in the economic sphere are bearing very heavily indeed on the small firm. A great deal is said about the weight of taxation of profits, and, of course, taxation of profits is very high. My hon. Friend the Member for Stechford (Mr. Roy Jenkins) pointed out yesterday afternoon, quite correctly, that the weight of taxation was bound to remain very high so long as we wish to maintain our present level of social services, carry through a substantial defence programme, and preserve the general level of social and economic equality built up in this country in the last few years. So long as we try to preserve these things the high level of taxation will raise a serious problem, because the weight of taxation bears much more heavily on the small firms than the large firms with their very large financial resources.
Since the party opposite came into power there is a second reason why current trends bear heavily on the small firm—namely, the new dear money policy of the present Government, the policy of credit restriction. The large firm has much greater financial resources, much easier and cheaper access to the new issue market, and a much easier possibility of borrowing in these circumstances.
For all these reasons the small firm is put into a particularly difficult situation, and we are genuinely concerned lest its capacity for growth should be seriously jeopardised. We on this side of the Committee, although we certainly do not ask for any concession particularly for the large firms that are perfectly well able to look after themselves even in present conditions, think there is a serious problem with small firms. We have had a Budget and a Finance Bill that will undoubtedly, if it goes through unamended, make things a great deal more difficult for them. We have had no serious concession from the Front Bench opposite for the small firm right through the Finance Bill.
One important point contained in a new Clause this afternoon would have assisted them, but it was turned down by the Government Front Bench, and if the small firms are to gain anything from the Finance Bill it will be as a result of Amendments moved from this side of the Committee. These are all reasons that have prompted us to put forward this new Clause.

Mr. Roy Jenkins: I hoped the Parliamentary Secretary to the Ministry of Civil Aviation would get up straight away and say, on behalf of the Government, that he would give a sympathetic reception to the Clause. I can only assume from the fact that he did not rise that we are not going to get a concession. If we were, I am sure the Patronage Secretary would have seen that he made it quickly. That is the conclusion I draw from the expression on his face during the course of the last hour or so of debate.
It is a very serious matter if we are not to get a concession from the Government on this last of the new Clauses, because it will mean that in this Budget and Finance Bill the Government are doing nothing at all to help small companies. I understood the Parliamentary Secretary to the Ministry of Civil Aviation to imply this afternoon that the Government had done something to help small companies by concessions on the Excess Profits Levy. That is an extraordinary argument. Admittedly, they may be less hard hit than they would have been a fortnight ago, but to come along with a most disastrous new tax, scale it down, and then say that the Government were helping small companies is surely most illogical.
A lot of hon. Members opposite have talked frequently about their desire to help small companies.
There are now in the Chamber some hon. Members from whom we have not heard very much during the debate on this Finance Bill. There is the hon. Member for Edinburgh, South (Sir W. Darling). I am sure he is extremely interested in small companies. We have not heard from him as much as we would have liked throughout the debate on this Bill. I think this new Clause goes very close to his interests and I hope that he may think fit, if the Government cannot give a concession, to join with us in urging them to do something. There are


some other hon. Members who, I am sure, would like to give their help in the same direction.
This would be a much more useful way of giving assistance to small and developing companies than the method chosen by the Government, of substantially increasing the amount of directors' remuneration which can be charged by director-controlled companies for the purpose of Profits Tax. After all, one only gets the money if one goes through the roundabout process of nominally paying out money in directors' remuneration while actually keeping it in the business; whereas if we have this £2,000 raised to £5,000 it will be a direct help to small companies to develop out of their own resources, which I think would be a very satisfactory state of affairs.
If this Clause is not accepted there is no question at all that the net effect of the Chancellor's Budget and his Finance Bill—and I am sure he does not want this—will be to make it relatively more difficult for small companies to develop, and it will put us in a position where any such development is likely to be by well-established, big companies rather than small ones. That is bound to happen with a Budget of which the main economic principles are the raising of the Bank rate to 4 per cent., the policy of dearer money, and the Excess Profits Levy, which will certainly hit small companies most severely. Unless the first year's financial policy of the Government is to result in a grave relative worsening of the position of small companies some concession must be made on this point.

Mr. Maudling: This new Clause has been supported by the joint eloquence of the hon. Member for Gloucestershire, South (Mr. Crosland) and the hon. Member for Stechford (Mr. Roy Jenkins), to which this Committee have now become fairly well accustomed. Their eloquence and persuasiveness is well known.

Mr. E. Femyhough: It has been very unrewarding.

Mr. Maudling: Perhaps it was undeserving.
The purpose of this new Clause is to increase the exemption limit for the purpose of ordinary Profits Tax from £2,000 to £5,000 and to increase the abatement accordingly. The two arguments put

forward by the hon. Member for Gloucestershire, South consisted of a minor and a major one. The first, which was the minor argument, was the analogy of the figure for exemption under the Excess Profits Levy. I do not think that argument holds good because there is no strict analogy to be drawn between the Profits Tax and the Excess Profits Levy. The Levy is an extraordinary tax in many senses, as hon. Gentlemen opposite will no doubt point out, and I hope that it will not become a permanent one.
The hon. Gentleman's major argument—as I think he agreed—was the fall in the value of money since the £2,000 limit was fixed. That is not a new point to this Committee. It was raised in 1949 and 1951, when certain hon. Members proposed that the exemption limit should be raised from £2,000 to £3,000. On both occasions it was turned down, on the second occasion by the hon. Member for Brighouse and Spenborough (Mr. J. Edwards) who dealt with this specific point. He said:
The hon. and learned Member for Wirral (Mr. Selwyn Lloyd) also referred to the changes in the value of money"—
as has his hon. Friend the Member for Gloucestershire, South, tonight.
As I have said earlier, if we are to talk of changes in the limits because of changes in the value of money there could be no end to the claims which could be put forward.
"—[OFFICIAL REPORT. 18th June, 1951; Vol. 489, c. 167.]
That is a very cogent argument, and one which fully disposes of the point put forward by the hon. Member for Gloucestershire, South. The main grounds on which it was turned down in 1949, and again in 1951, were that the cost in either case was estimated at £4 million, and I am advised that the cost of this concession asked for in the new Clause would be in the neighbourhood of £4 million.
4.30 a.m.
The hon. Member for Brighouse and Spenborough made an extraordinary argument last year to the effect that when Profits Tax was being raised it was inconsistent to give an additional concession. I should have thought the case for a concession to small businesses would go on as the burden of the tax goes up. What has happened this year—and this is what makes it different—is that not only has my right hon. Friend introduced


a minor concession about dividends but he has also taken the important step of halving the rate of undistributed Profits Tax. That is an important step, to which little reference has been made from the other side of the Committee.
Therefore, in these circumstances, bearing in mind that this year the rate of Profits Tax has been reduced rather than increased, that the cost of this concession is the same as it would have been last year when it was turned down by the hon. Member for Brighouse and Spenborough on behalf of last year's Government, I must ask the Committee to reject the new Clause asking for a further concession in addition to those which the Chancellor has given, which, in the light of this year's concession and last year's argument, is unreasonable.

Mr. Jay: I find the hon. Gentleman's answer extremely disappointing. All he has done is to say that a similar Clause was advanced in earlier years and that certain arguments were used in objection to it. Of course, there are certain relative respects in which circumstances have changed this year. The Government have entirely reversed the monetary policy then being pursued. They have introduced a policy of dearer money with more restrictions on credit which falls more heavily on small and growing firms. That is an entirely new factor in the situation which I do not think the hon. Gentleman would dispute. Nor do I think he would dispute that it is much more difficult as a result of that for many small firms to obtain new capital, without which they cannot possibly expand.
Secondly, the Govenment have introduced the Excess Profits Levy in which they named precisely this figure of £5,000 as the proper one for exemption, which shows that they really regard that as a reasonable minimum below which the Profits Tax should not operate. The hon. Gentleman tried to get out of that by pointing out that the Profits Tax, if not permanent, is likely to be more longterm than the Excess Profits Levy. If it is to be of a longer term, the reason for giving a rebate is greater.
Surely the case for helping some of the small growing firms is overwhelming in the circumstances that now exist. We live in a mixed economy and we want a good deal of public enterprise and also private enterprise, and if we are going to have private enterprise we want it to

be profitable enterprise. We want many and growing firms, and new entrants into existing lines of business.
I happen to have in my own constituency an interesting case of the sort of firm which we have in mind. It is a very small firm, started only five or six years ago by six partners who were engineering workers. They started the partnership in the evenings after their ordinary shifts with an employer. They had only £600 which they had saved, and after 18 months they were able to give up working as employees and devoted the whole of their time to the new business. Today they have about 80 employees, and are exporting 50 per cent. of their products; and as my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) contemplated—although he did not know this case—they are producing, as to a considerable proportion of their output, entirely new products which have not previously been made in this country.
That, surely, is just the sort of expansion and development which we should like to see; but the main difficulty which these people found was that of capital. This firm found that the considerable profits taxation, which falls even on businesses of that diminutive size, was a problem, and I am sure that is contrary to the idea of profits taxation that it should aggravate the problems of a firm of this kind. I should have thought that we all wanted to encourage a venture of this type, whether we believe in public enterprise on a large scale or not.

Mr. Maudling: Why did the right hon. Gentleman's Government refuse to do anything about this in the years of expansion?

Mr. Jay: The problem has been aggravated by the introduction of E.P.L., apart from the Chancellor's monetary policy; and this £2,000, I think, dates back, not to 1947, but to 1937, when the N.D.C. was first introduced. But, in any case, as the years go on, with changes in economic circumstances and in the value of money, one has to see if the figures need revision. We thought that with the introduction of E.P.L. that time had arrived; in any case, we on this side think that the Government should take this modest, and not very expensive, step in order to give help to new and growing firms.

Mr. Crosland: This has been a very disappointing debate; partly because of the reply given by the Parliamentary Secretary to the Ministry of Civil Aviation and partly because of the complete silence on the part of right hon. and hon. Members opposite; I do not know if it is because of a lack of physical toughness which is apparent on this side. We have heard over the last three weeks from hon. Members opposite about the difficulties of the smaller firms in building up their businesses; and now that we offer a practical concession—which is more than they have given—I should have thought they would have supported us. There have been many sincere speeches from that side, and it is very disappointing that, when they have a chance to put their principles into effect, we have heard nothing at all from them.
I think the case from the Government Front Bench has been very adequately answered by my right hon. Friend the Member for Battersea, North (Mr. Jay) and the case for this new Clause is stronger than ever before. I must admit that I thought the cost would be more than £4 million, but if it is only that, surely the point should appeal to the hon. Member for Kidderminster (Mr. Nabarro).
I should have thought that this was something which would appeal to many hon. Members opposite—a really important concession at a very small cost to the Treasury which will not affect a Treasury

surplus which is much too big already. It is now clear that the Budget is too disinflationary and the Chancellor can certainly afford £4 million to give this stimulus to new companies.

I believe that even at this very late stage the Chancellor, who has not been speaking very much this evening, might be willing to intervene and say that he has some sympathy with this Clause because it will meet with the silent support of his own side of the House—and silent support is better than none at all. If the Chancellor did concede this, he might very nearly complete the whole of the Bill in the most amicable frame of mind and set an agreeable seal on our proceedings over the last three weeks. But if we are to have no concessions from the Chancellor I certainly think that we on this side should take this to a Division.

Mr. Jay: Can the Parliamentary Secretary to the Ministry of Civil Aviation not assure us that he would hope to see this level lifted this year or at least in the future? Or is his view that, so far ahead as he can see, the level will be maintained?

Mr. Maudling: We hope to see levels of taxation on industry progressively reduced from the excessive levels at which they have been held.

Question put, "That the Clause be read a Second time."

The Committee divided: Ayes, 99; Noes, 125.

Division No. 154.]
AYES
[4.43 a.m.


Acland, Sir Richard
Edelman, M.
Lindgren, G. S.


Albu, A. H.
Edwards, John (Brighouse)
MacColl, J. E.


Awbery, S. S.
Fernyhough, E.
McKay, John (Wallsend)


Bence, C. R.
Field, W. J.
MacPherson, Malcolm (Stirling)


Benson, G. 
Fienburgh, W.
Mayhew, C. P.


Blackburn, F.
Freeman, John (Watford)
Mikardo, Ian


Blenkinsop, A.
Gaitskell, Rt. Hon. H. T. N.
Mitchison, G. R.


Boardman, H.
Gibson, C. W.
Morgan, Dr. H. B. W.


Bowles, F. G. 
Greenwood, Anthony (Rossendale)
Morley, R.


Braddock, Mrs. Elizabeth
Hall, Rt. Hon. Glenvil (Colns Valley)
Morris, Percy (Swansea, W.)


Brockway, A. F.
Hamilton, W. W.
Moyle, A


Brook, Dryden (Halifax)
Hargreaves, A.
Mulley, F W.


Burton, Miss F. E.
Hayman, F. H.
Neal, Harold (Bolsover)


Butler, Herbert (Hackney, S.)
Herbison, Miss M
Oswald, T.


Callaghan, L. J. 
Hobson, C R.
Pargiter, G. A.


Castle, Mrs. B. A
Holman, P.
Paton, J.


Chetwynd, G. R.
Hoy, J. H.
Pearson, A.


Coldrick, W.
Hudson, James (Ealing, N.)
Plummer, Sir Leslie


Collick, P. H.
Hughes, Emrys (S. Ayrshire)
Price, Joseph T. (Westhoughton)


Cove, W. G.
Hughes, Hector (Aberdeen, N.)
Proctor, W. T.


Crosland, C. A. R.
Hynd, J. B. (Attercliffe)
Reeves, J.


Dalton, Rt. Hon. H.
Jay Rt. Hon. D. P. T.
Rhodes, H.


Davies, A. Edward (Stoke, N.) 
Jenkins, R. H. (Stechford)
Roberts, Albert (Normanton)


Davies, Ernest (Enfield, E.)
Jones, T. W. (Merioneth)
Boyle, C.


Davies, Harold (Leek)
Keenan, W.
Schofield, S. (Barnsley)


Delargy, H. J.
King, Dr. H. M.
Shackleton, E. A. A.


Driberg, T. E. N.
Lever, Leslie (Ardwick)
Simmons, C. J. (Brierley Hill)


Ede, Rt. Hon. J. C. 
Lewis, Arthur
Snow, J. W.




Soskice, Rt. Hon. Sir Frank
Wells, William (Walsall)
Williams, W. R. (Droylsden)


Stewart, Michael (Fulham, E.)
West, D. G.
Williams, W. T. (Hammersmith, S.)


Sylvester, G. O.
Whiteley, Rt. Hon. W.
Wilson, Rt. Hon. Harold (Huyton)


Thomas, David (Aberdare)
Wilkins, W. A.



Wallace, H. W.
Willey, Octavius (Cleveland)
TELLERS FOR THE NOES:


Wells, Percy (Faversham)
Williams, Ronald (Wigan)
Mr. Hannan and Mr. Holmes.




NOES


Allan, R. A. (Paddington, S.)
Godber, J. B.
Oakshott, H. D.


Alport, C. J M.
Gomme-Duncan, Col. A.
Odey, G. W.


Arbuthnot, John
Graham, Sir Fergus
Ormsby-Gore, Hon. W. D.


Ashton, H. (Chelmsford)
Grimston, Hon. John (St. Albans)
Orr-Ewing, Charles Ian (Hendon, N)


Assheton, Rt. Hon. R. (Blackburn, W.)
Grimston, Sir Robert (Westbury)
Partridge, E.


Astor, Hon. W. W. (Bucks, Wycombe) 
Harrison, Col. J. H. (Eye)
Powell, J. Enoch


Baldwin, A. E. 
Harvey, Ian (Harrow, E.)
Price, Henry (Lewisham, W.)


Banks, Col, C. 
Heath, Edward
Profumo, J. D.


Barber, A. P. L. 
Higgs, J. M. C.
Raikes, H. V.


Bennett, Dr. Reginald (Gosport) 
Hill, Mrs. E. (Wythenshawe)
Redmayne, E.


Beach, Maj. Hicks
Hirst, Geoffrey
Remnant, Hon. P.


Bishop, F. P. 
Holland-Martin, C. J.
Renton, D. L. M


Black, C. W. 
Hornsby-Smith, Miss M. P.
Robinson, Roland (Blackpool, S.)


Boyd-Carpenter, J A
Horobin, I. M.
Rodgers, John (Sevenoaks)


Boyle, Sir Edward
Howard, Gerald (Cambridgeshire)
Roper, Sir Harold


Bromley-Davenport, Lt.-Col. W. H. 
Howard, Greville (St. Ives)
Russell, R. S.


Buchan-Hepburn, Rt. Hon. P. G. T. 
Jenkins, R. C. D. (Dulwich)
Ryder, Capt. R. E. D.


Bullard, D. G. 
Johnson, Eric (Blackley)
Salter, Rt. Hon. Sir Arthur


Butler, Rt. Hn. R. A. (Saffron Walden) 
Jones, A. (Hall Green)
Schofield, Lt.-Col. W. (Rochdale)


Carr, Robert (Mitcham) 
Kaberry, D.
Scott, R. Donald


Cary, Sir Robert
Lambton, Viscount
Smithers, Peter (Winchester)


Channon, H. 
Lancaster, Col. C. G.
Stevens, G. P.


Clarke, Col. Ralph (East Grinstead) 
Langford-Holt, J. A.
Strauss, Henry (Norwich, S.)


Cole, Norman
Legge-Bourke, Maj. E. A. H
Studholme, H. G


Colegate, W. A. 
Legh, P. R. (Petersfieid)
Sutcliffe, H.


Conant, Maj. R. J E. 
Linstead, H. N.
Thomas, P. J. M (Conway)


Crosthwaite-Eyre, Col. O. E. 
Macdonald, Sir Peter (I. of Wight)
Thompson, Lt.-Cdr. R. (Croydon, W.)


Crouch, R. F. 
Mackeson, Brig. H. R.
Thorneycroft, Rt. Hn. Peter (Monmouth)


Crowder, Petre (Ruislip—Northwood) 
McKie, J. H. (Galloway)
Tilney, John


Darling, Sir William (Edinburgh, S.) 
MacLeod, Rt. Hon. Iain (Enfield, W.)
Vosper, D. F.


Deedes, W. F. 
Macpherson, Maj. Niall (Dumfries)
Wakefield, Edward (Derbyshire, W.)


Dodds-Parker, A. D. 
Maitland, Patrick (Lanark)
Ward, Miss I. (Tynemouth)


Donaldson, Cmdr. C. E. McA. 
Manningham-Buller, Sir R. E.
Waterhouse, Capt. Rt. Hon. C.


Doughty, C. J. A
Maude, Angus
Wellwood, W.


Duthie, W. S. 
Maudling, R.
White, Baker (Canterbury)


Fell, A. 
Maydon, Lt.-Cmdr. S. L. C.
Williams, Gerald (Tonbridge)


Finlay, Graeme
Mellor, Sir John
Williams, R. Dudley (Exeter)


Fleetwood-Hesketh, R. F. 
Molson, A. H. E.
Wills, G.


Fletcher-Cooke, C. 
Nabarro, G. D. N.
Wilson, Geoffrey (Truro)


Fraser, Sir Ian (Morecambe &amp; Lonsdale) 
Nicholson, Godfrey (Farnham)



Gage, C. H. 
Nicolson, Nigel (Bournemouth, E.)
TELLERS FOR THE NOES:


Galbraith, Cmdr. T. D (Pollok) 
Nield, Basil (Chester)
Mr. Norman and Mr. Drewe.


Galbraith, T. G. D. (Hillhead) 
Noble, Cmdr. A. H. P.



Question put, and agreed to.

First and Second Schedules agreed to.

Orders of the Day — Third Schedule.—(PURCHASE TAX: AMENDMENTS OF FINANCE ACT, 1948, SCHEDULE 8, PART 1.)

Amendment made: In page 72, line 35, leave out from beginning, to end of line 41, and insert:
2. In paragraph (f) of Group 1 for the words "'other than those comprised in paragraphs (c) or (e) of this Group" there shall be substituted the words "other than articles comprised in paragraph (e) of this Group, and other than garments merely trimmed with fur skin in the case of which the trimming of fur skin neither represents a cost to the manufacturer of the garment greater than the cost to him of the other components nor has an area greater than one-fifth of the area of the outside material;—[Mr. Boyd-Carpenter.]

Schedule, as amended, agreed to.

Fifth and Sixth Schedules agreed to.

Orders of the Day — Seventh Schedule.—(PROFITS TAX: CONSEQUENTIAL AND TRANSITIONAL PROVISIONS.)

Amendments made: In page 88, line 42, leave out "fifteen," and insert "twenty."

In line 43, leave out "fifteen," and insert "twenty."

In line 44, leave out from "added," to end of line 11, on page 89.

In page 89, line 22, at end, insert:
or at twenty per cent. for previous chargeable accounting periods ending after the end of the year nineteen hundred and fifty-one.

In line 23, leave out "two preceding paragraphs," and insert "preceding paragraph."

In line 24, leave out "at fifteen per cent. or."

In line 37, at end, insert:
ending at or before the end of the year nineteen hundred and fifty.

In line 39, leave out "fifteen per cent."

In page 90, line 9, leave out "distribution," and insert "distributions."

In line 16, leave out "fifteen," and insert "twenty."

In page 90, leave out lines 43 to 45.

In page 91, line 1, leave out "paragraph," and insert "sub-paragraph."

In line 14, leave out from "year," to end of line 15, and insert:
but with the substitution for references to the tax originally ascribable to the loan of references to half the amount of that tax.

In page 92, line 14, leave out paragraph 6.—[Mr. Maudling.]

Schedule, as amended, agreed to.

Orders of the Day — Schedule 12.—(ESTATE DUTY: LIST OF WOMEN'S SERVICES.)

Mr. Charles Royle: I beg to move, in page 119, line 39, at the end, to insert "Royal."

Mr. Emrys Hughes: I very much regret that it has become my duty to move this very important Amendment.

The Deputy-Chairman (Mr. Hopkin Morris): The Amendment has been moved. Do I understand that the hon. Gentleman wants to speak to it?

Mr. Hughes: Yes. I think this important Amendment should not be allowed to pass in silence, and I should like to ask the Chancellor what he means by allowing this insult to the Royal Army Dental Corps. I am surprised that the hon. Gentleman the Member for Dudley (Mr. Wigg), in whose name the Amendment stood, is not in his place. [An HON. MEMBER: "He is; he is in bed."] I understood that the boy had fled from the burning deck and had left me in control.
The Secretary of State for War and the other Service Ministers should have been here, and I am strongly in favour of having them shot at dawn, along with the Chancellor of the Exchequer. I am in favour of this Amendment, as it does justice to an important section of the Armed Forces.

Mr. Boyd-Carpenter: The purpose of the Amendment, about the moving of which there appeared to be some ambiguity but, clearly, much enthusiasm, is to correct an error in the Bill in the designation of the Royal Army Dental Corps. I have the agreeable experience at this stage of our proceedings of being able to say that we are very glad to accept the Amendment.
Question put, and agreed to.

Schedule, as amended, agreed to.

Orders of the Day — Schedule 13.—(REPEALS.)

5.0 a.m.

Mr. R. A. Butler: I beg to move, in page 122, line 48, column 3, to leave out "and," and to insert "or."
This is a drafting Amendment to correct a misquotation in the Bill of some words in an earlier Act which it is proposed to repeal. The repeal is made necessary by words in Clause 61 of the Bill referring to the exemption from Estate Duty of estates of members of the Armed Forces.
Amendment agreed to.

Schedule, as amended, agreed to.

Orders of the Day — New Schedule.—(EXCESS PROFITS LEVY: COMPUTATION OF VALUE OF ASSETS AND LIABILITES FOR PURPOSES OF CAPITAL STANDARD.)

Assets.

1. Paragraph 5 of the Ninth Schedule to this Act shall, with the necessary modifications, apply for the purpose of computing the value, at the end of the year, of any assets of a class described in the first column of the Table set out in that paragraph as it applies for the purpose of computing the value of those assets in the case of such a distribution as is mentioned in that paragraph.

2. The amount of the debts due to the body corporate shall be taken to be reduced by the amount of such deductions, if any, as are allowable under paragraph (i) of Rule 3 of the Rules applicable to Cases I and II of Schedule D in computing the profits or gains of the body corporate for income tax purposes.

3. The value of any hereditament in respect of which a value payment under the War Damage Act, 1943, has been made, or the value of which before and after the occurrence of any war damage has been determined for the purposes of such a payment, shall be taken to be equal to the amount paid in cash for the hereditament by the body corporate less the amount of the value payment, and, if the amount of the value payment is equal to or exceeds the first-mentioned amount, shall he taken to be nil.

4. The value of any other assets shall he taken to be equal to the amount paid therefore in cash by the body corporate.

5. The assets of the body corporate shall be deemed to include the amount, after deduction of income tax, of any unpaid post-war refund (within the meaning of Part IV of the Finance (No. 2) Act, 1945).

Liabilities.

6. The liabilities of the body corporate shall be deemed to include the following sums, whether or not they have become payable, that is to say—

(a) any borrowed money or other debt owed by the body corporate;
(b) any such sums in respect of accruing liabilities as are allowable as a deduction in computing profits or gains for income tax purposes, or would be so allowable but for the provisions of paragraph (1) of Rule 3 of the Rules applicable to Cases I and II of Schedule D; and
(c) in the case of the business of an assurance company, also any sums representing profits of its life assurance business belonging or allocated to, or reserved for, or expended on behalf of, policy holders or annuitants (being sums which would be excluded, under subsection (1) of section sixteen of the Finance Act, 1923, in computing the profits of the company for income tax purposes).

7. The liability at the end of the year in respect of income tax shall be taken to include any liability for income tax payable for the year of assessment ending on the fifth day of April next following the end of the year.

8. The liability at the end of the year in respect of excess profits tax shall be taken to include any liability under an assessment made after the end of the year.

9. The liability at the end of the year in respect of profits tax shall be taken to include any liability in respect of profits for any period ending at or before the end of the year.

General.

10. Where no balance sheet is drawn tip by the body corporate for the end of the year.—

(a) the value of its assets at the end of the year shall be taken to be the same as at the last preceding date for which a balance sheet is drawn up by it, except that there shall be added to the value of those assets the amount, if any, which would be the amount of the undistributed profits of the body corporate for an accounting period beginning at the date for which the balance sheet is drawn up and ending at the end of the year, if in paragraph 1 of the Ninth Schedule to this Act—

(i)for the amount referred to in paragraph (a) of sub-paragraph (2) there were substituted all the profits for the accounting period, and

(ii) for the amount referred to in paragraph (c) of sub-paragraph (3) there were substituted the profits tax payable in respect of those profits; and

(b) the value of its liabilities at the end of the year, other than liabilities in respect of any tax, shall be taken to be the same as at the last preceding date for which a balance sheet is drawn up by it, and its liabilities at the end of the year in respect of tax shall be as mentioned in paragraphs 7 to 9 of this Schedule, except that the liability in respect of profits tax shall be taken not to include liability in respect of profits for any period commencing after the date for which the balance sheet is drawn up.—[Mr. Boyd-Carpenter.]

Brought up, and read the First time.

Mr. Boyd-Carpenter: I beg to move, "That the Schedule be read a Second time."
This new Schedule is consequential upon an addition to the Bill at an earlier stage of my right hon. Friend the Chancellor's proposal to provide a further alternative standard for E.P.L. purposes based on net assets. The Schedule indicates the way in which the standard is to be ascertained. In substance, with one modification, it re-enacts the machinery which existed under the old war-time procedure. It also embodies provisions in respect of borrowed money.
The only other point arises on paragraph 10, which gets over the difficulty that company accounts may not be completed as at 31st December in either 1946 or 1951. It provides that, in that case, the accounts made up to the nearest date before those dates shall be treated as being in fact made on those dates.

Schedule read a Second time, and added.

Bill reported, with Amendments.

As amended, to be considered this day, and to be printed. [Bill 110.]

Orders of the Day — ESTIMATES

Mr. Walter Fletcher and Air Commodore Harvey discharged from the Select Committee on Estimates, and Mr. Nigel Nicolson and Brigadier Peto added.—[Mr. Drewe.]

HOUSING, CLYDEBANK

Motion made, and Question proposed, "That this House do now adjourn."[Mr. Butcher.]

5.3 a.m.

Mr. Cyril Bence: The matter I wish to discuss is one of grave urgency. As hon. Members probably know, the Burgh of Clydebank was heavily bombed in March, 1941. The damage was such that of 11,800 houses 4,050 were destroyed. With the exception of 259, those 11,800 houses were privately owned. The Burgh of Clydebank was compelled as quickly as possible to replace those 4,050 houses because in the area was an ordnance factory, a large shipyard and an important factory engaged upon war work. It was imperative that the people should be rehoused quickly because of the contribution they were making in the war against Nazi Germany.
Those 4,000 houses have been built, but the replacement has resulted in the Burgh of Clydebank being left with an annual deficit on housing of £61,000 for the next 60 years, and not one house has yet been built to provide for the natural increase in population and the overcrowding that existed between the wars. The years between 1942 and 1951 have been occupied in the replacement of that bomb damage.
Clydebank suffered that damage because it was making such a great contribution to the national effort. It was obviously singled out by the enemy, and its people suffered tremendous hardship. The scars still remain, not only in the burgh itself but amongst its people. Many of my constituents are cripples, and there are a great number who lost wives, husbands or children in the blitz, and yet the people of the burgh are burdened increasingly by the annual debt charge on the replacement of those houses, which in all justice should have been a national charge and not a local charge upon the people.
Furthermore, as the result of that loss of 4,000 privately owned houses, the burgh lost an aggregate rateable value of £313,000. The previous Government made a grant in aid of £213,000, but that has now ended and Clydebank is left with the charge of £61,000 a year for the next 60 years. In addition, the destructor

In Clydebank was seriously damaged and has to be replaced. Its cost of replacement, as a result partly of the increase in the Bank rate and the increased interest rates on local loan charges, will be an extra £564 per annum.
Then we are compelled to move out of the burgh, to extend the boundary, and to build houses to take the over-spill population and the overcrowding. We are forced to go out to the Faifley area and to build there. The cost of services for housing and the increased interest rates resulting from the policy of the Government are leading to such a problem that the rate contribution of the burgh next year, when the Faifley scheme is in operation to provide housing apart from the war damage replacement, will be 5s. 8d. in the £. In 1954 it will be 7s. 2d. in the £, and by 1955 the figure, which is for the housing deficit alone, will be 8s. 8d.
All this is the consequence of the bombing of Clydebank in 1941. Not for the life of me can I understand why the local residents who suffered the bombing not only in Clydebank but in other areas that were heavily bombed, should be burdened for the rest of their lives with such a heavy charge upon them because of the high replacement cost of the capital loss in the form of houses.
The development area in the central part of Clydebank, which was heavily blitzed, is to be used as a re-development area. If we were to build in that central area the kind of huge tenements that were there before the war, Clydebank could claim from the War Damage Commission, but we cannot build in that area. We have to go further afield, and instead of building houses for £900, which we could claim from the War Damage Commission, we are faced with building houses that are costing on the average £2,000.
Again, to get the War Damage claim in the central area that has been completely flattened, rebuilding must take place within a certain period of time. That cannot be done, because there is too much to be done. The grant received would decrease as time went on, because it is impossible to complete the task in the period laid down by the conditions of the War Damage Commission.
We do not ask for a complete financial rehabilitation, but at least the capital


cost that we have incurred in replacing these 4,000 houses should be provided by the national Exchequer. It could come within the conditions that have applied in the past; we have had grants in Clydebank from the Exchequer, but they have ceased. The time is opportune—and I speak particularly for Clydebank but also for other cities—;that something should be granted.
I was in Clydebank the other week and the people there are remarkable. I have been there only 12 months, but it is wonderful what they have done in spite of their difficulties. They had an exhibition of arts and crafts and I was amazed at what they had done in their own homes. Many of them who were painting china or making gloves were injured in the blitz. It is tragic to think that for 60 years the people of Clydebank now have to carry the burden of interest charges for the service of the debt to replace what was destroyed while they were serving their country, just as the men in the Forces were. It is a gross injustice that that, or any other burgh in the same circumstances, should have to bear this burden all those years, simply because they were the centre of an important war industry.

5.13 a.m.

The Joint Under-Secretary of State for Scotland (Commander T. D. Galbraith): I have the very greatest sympathy with the case that the hon. Gentleman has deployed before the House, and with the Town Council of Clydebank. I met the Provost of Clydebank with certain members of his council and his officials on 25th April. when they laid their difficulties before me, and we had a considerable discussion upon them. Since then I have felt it my duty to go carefully into the situation.
I find that I am not wholly in agreement with certain of the figures submitted to the House, although approximately I am in agreement with the hon. Gentleman. For example, I find that we can say that roughly 4,000 houses were destroyed; the figure the hon. Gentleman gave was 4,050. But 3,600 were owned by private persons, and 400 belonged to the Town Council of Clydebank.
As a result of the War Damage Commission's settlement of the damage, when they made value payments to 3,200 of the private owners and cost of works pay-

ments to 400 of those owners, and to the town council in respect of their 400 houses, the town council has had to replace 3,200 houses to make good the damage. In addition, they have had to provide—as have all other local authorities—for the normal housing requirements of their population.
I want to join with the hon. Gentleman in congratulating the Town Council of Clydebank on the very great effort and progress they have made in their reconstruction. After all, it is a very great achievement when we recall that the population of Clydebank today is practically the same as it was before the blitz, and also that the rateable value has increased by some 18 per cent.
The Council have themselves built 3,594 houses, and they have another 823 under construction. In addition, they have provided 203 temporary houses and, as the hon. Gentleman knows, the Scottish Special Housing Association has come to their aid; so I discovered from my inquiries into the situation that in fact, all agencies taken into account, they have completed some 4,500 houses. This is equal to the astonishing figure of 87½ houses per thousand of the population, and is an extraordinary achievement in all the circumstances.
That record naturally involves a very heavy financial commitment. The hon. Gentleman has given us the housing rate for next year and for 1954. I have not worked this out, but I know that last year the housing rate was 4s. 1d. and the total rate was 19s. 7d. If we use the conventional fraction of 25 per cent. and measure the difference between valuation for rating in England and Scotland, that is equivalent to a rate of 24s. 6d. in England; but I think it is fair to point out that other Scottish burghs have a comparable rate. In Airdrie the rate last year was 19s. 9d. and in Coatbridge it was 19s. 7d.
In all the circumstances of which the hon. Gentleman has told us, I can well understand that the Town Council of Clydebank would be very grateful for further financial help, and it is with very great regret that I have to tell the hon. Gentleman that there is no possibility of a special grant being made. With regard to the hon. Gentleman's comments in relation to other blitzed towns, I would say that Clydebank has been treated in exactly the same way as the others.


While the result of the war damage they suffered resulted in a loss of rateable value, they received yearly a Treasury grant which, as the hon. Gentleman said, came to an end in 1950-51. There is only one exception to that general rule, and that is in the case of West Ham, where there are very special circumstances, because the rateable value last year was still only some 79 per cent. of the rateable value before the war.
I would point out that Clydebank has had other special assistance from the Scottish Special Housing Association, which have built at no cost whatever to the ratepayers, 650 houses, and which is building, at the present time, 150 more. It has been mentioned to me that Clydebank would like the Scottish Special Housing Association to assume complete responsibility for some of the local authority's houses. The hon. Gentleman put it in another way and said that they would like the Exchequer to assume responsibility for the refund of the capital cost of making good the damage.
Either of those methods would give very substantial relief to the ratepayers, but I am sorry to say that the proposal that the Scottish Special Housing Association should take over responsibility for any of the existing houses is quite out of the question. I hope that in view of the special circumstances in Clydebank, the Scottish Special Housing Association will begin the building of another 400 houses within the next year or two. I can tell the hon. Gentleman that we are at present considering what additional houses will be built by the association throughout Scotland. When that programme is approved, Clydebank will not be overlooked.

Mr. Bence: The hon. and gallant Gentleman mentioned the special case of West Ham which only had 79 per cent. of its pre-war rateable value. I would like to point out that the grant in aid for rates to Clydebank for 1927-1928 was £1,763, and the loss from the equalisation grant was nil in that period. In 1951-1952 the loss in rates—and we have some big industrial plants there—was £103,000.

Commander Galbraith: The blitz grant was given to make up the loss in rateable value. Clydebank's rateable value is now almost one-fifth more than

it was before the blitz, and it is for that reason the grant was stopped. In essence the difficulties in Clydebank are the same as in any other area in which a high proportion of the houses has been built by the local authority. The position is not unique, because the percentage of houses owned by the authority in Clydebank was 49 in 1951–52: in Ayr the local authority owned 58.9 per cent., in Hamilton 48.6 per cent. and in other areas the proportion was also high.

Mr. Bence: What percentage of the houses owned by the local authority was built before the war and what percentage were built in the post war period?

Commander Galbraith: A certain number were built before the war.

Mr. Bence: How many?

Commander Galbraith: The position turns very largely on the proportion of the houses that are actually owned by the local authority. I am aware that Clydebank is trying to ease the burden on the rates in every possible way. I am told, for example, they are giving as many licences as possible to private persons so that they may build their own houses. Those who are doing so are, indeed, public benefactors, because they are easing the burden on their fellow citizens.

Mr. Bence: The hon. and gallant Gentleman referred to private persons getting licences to build in Clydebank, and private builders building there. They have got one; that is mine, for I am having a bungalow built. But there is no room there to build.

Commander Galbraith: The hon. Gentleman's information would not appear to be as good as mine which I may say was given to me by the highest authority in the affairs of Clydebank. They did not tell me how many licences were being given. They said they were giving every single licence they could to ease the burden on the ratepayers.

Mr. Hugh Delargy: How many did they give?

Commander Galbraith: They did not tell me.

Mr. Delargy: Why not?

Commander Galbraith: The hon. Gentleman can go and discover the number for himself.
I want further to say that this difficulty which has arisen in Clydebank is an example of difficulties arising elsewhere, and is one which has to be examined in its general and overall aspects. At the present moment, as the hon. Gentleman may know, there is a working party going into the operation of the equalisation grants, and I hope that that working party, and its examination, will provide the opportunity for inquiring into the general aspects of the matter. I cannot say whether this review of the situation will result in our finding that something can be done to ease the position of authorities like Clydebank and others in the same position. But, I can assure him, and the House, that the position will be very carefully examined in relation to existing grants. I am sorry that I cannot give a clearer or more satisfactory answer. This is a matter of general concern, and one which will have the general review of which I have already spoken.

Mr. James H. Hoy: Could we be told anything more about examination of the equalisation grant? It will be recalled that, when first brought into being, it was on the understanding that there was to be a revision of the rateable values in England. May we be told if that is going to be taken into account in this review?

Commander Galbraith:: Before one could give any useful answer one would have to see the result of the review. The hon. Member refers to the revision of rateable values in England, but that appears to be a matter still somewhat ahead in time.

Mr. Hoy: It is extremely important, so far as Scotland is concerned, and what we should like to know is if Clydebank is being taken into consideration.

Commander Galbraith: The point now being raised is a particular and specific point of the equalisation grant, whereas I am required to answer a debate on housing in Clydebank. I have given the best answer I can at this hour.

Sir William Darling: (Edinburgh, South): Is it not the case that Scotland has been disappointed with the equalisation grant, not only in Clydebank, but elsewhere in the country?

Commander Galbraith: A great number of anomalies have been found, which are now the subject of inquiry.

Mr. Hoy: It was agreed that this revaluation should take place so far as England was concerned. In his reply to my hon. Friend the Member for Dunbartonshire, East (Mr. Bence), the Joint Under-Secretary said we should have to reconsider revaluation with a reconsideration of the equalisation grant; and he said that might help Clydebank. Would he be prepared to go so far as to say that the revaluation in England would be taken into account, because on that depends Scotland's share of what the grant would be in future?

Commander Galbraith: I said that, as a result of this review, ways and means might appear; but that it was too early for me to say whether or not that would be the result of the review.

Sir W. Darling: Can my hon. and gallant Friend tell us how far it is true to say that Scotland has, unfortunately, been tied to the English "tail" in these matters?

Commander Galbraith: I do not think that I can deal with that point now.

Adjourned accordingly at Half-past Five o'Clock a.m., Thursday, 29th May.